Student Loans How Much Can I Borrow

Student loans carry high interest rates, but they can help you pay for college expenses. If you attend school full-time at a four-year public university, you qualify for federal student loans if you have a financial need. You’ll probably get money from two different government agencies — the Federal Family Education Loan (FFEL) Program and the William D. Ford Direct Subsidized/Unsubsidized Loan program.

You generally have to start repaying your loan right after graduation. But don’t worry! Repayments aren’t due until nine months after you stop making payments. And remember, paying less than the minimum amount may not cause your total monthly payment to increase. So if you can make smaller payments each month, you could save a lot of money over time.

The amount you borrow depends on how much financial aid you receive. Your family’s income determines whether you’re eligible for any scholarships or grants that might cover some of your costs.

Before applying for a student loan, check out what types of repayment options are available. Undergraduate students who graduate before July 1, 2016, may take advantage of certain extended repayment programs. Graduate students may be eligible for special deferral provisions. Students who entered repayment in August 2015 or later may be able to sign up for Income Based Repayment.

If you think you might run short of cash while attending school, consider borrowing extra money from friends and relatives. You can ask family members or close friends to write you a personal check instead of using their credit cards. Remember to repay them. Or you may want to find someone willing to lend you money for the duration of your schooling. Check with your local bank or credit union to see if there’s anyone near you who would be willing to do so.

A private student loan may offer lower interest rates than a federal loan, but you’ll still owe back payments either way. Private lenders often charge higher rates if you’re unable to prove you’ve taken steps to reduce your debt burden by consolidating your federal loans.

Finally, if you don’t have enough money saved for college, you should look into establishing an emergency fund. These savings accounts will give you ready access to funds when unexpected bills show up.

Student Loans How Much Can I Borrow

What is student loan debt?

Student loans are essentially debts incurred by students after they graduate from college. Student loans may include federal loans (or government-backed) and private loans. Private student loans are often issued by banks and other lending institutions, while federal loans are backed by the U.S. Department of Education. These types of loans do not have to be paid back until after you’re no longer actively attending school. However, if you don’t pay off your student loans before you start earning substantial income, interest begins to accrue immediately. Interest rates vary per lender and type of loan. Generally speaking, federal loans tend to have higher interest rates than private ones. In addition, the amount of time you take to repay your loans is based on how much you borrowed and the length of the repayment term. The average college graduate has about $25,000 in student loan debt. Source: Bankrate

Where does the money go?

The money goes to various places throughout the country. Typically, student loans go towards paying out tuition costs at universities and colleges, as well as housing costs. If you’re lucky enough to land an internship or job while enrolled in school, some of that cost could be covered by your employer. You could also spend your student loans on books, supplies, transportation, etc. There are many things you could potentially use your student loan money for, including travel expenses, food, and even your rent! Source: Bankrate

Are there any ways to reduce my student loan debt?

There are a few options to help cut down on your student loan debt:

Take out a consolidation loan. A consolidation loan consolidates several different debts into one. When you consolidate, your monthly payments decrease. As long as you make your regular payments, you will end up repaying less over a period of years. You might also qualify for lower interest rates. Most lenders offer 0% APR loans.

Pay extra on your principal. Whenever possible, try to pay more on your principal rather than the interest. While this might seem counterintuitive, it actually works in your favor. If you make a monthly payment on your principal, you won’t incur any interest. This technique can work wonders for people who are struggling with high monthly payments.

Make more than minimum payments. Don’t get discouraged if you haven’t been able to keep your payments current. Making small increases in your payments each month can lead to substantial savings over time.

Pay off your debt faster. If you’re only making the minimum payment on your student loan debt, it’s unlikely that you’ll ever pay off your entire balance. Instead, focus on paying off the smallest portion of your total bill first. Your goal should be to pay off the largest amount of your outstanding debt. Keep in mind that the sooner you make those payments, the quicker you’ll be rid of them. Source: Bankrate.com

Student Loans How Much Can I Borrow

This video goes over how much student loans should cost students. Students who have student loans should not pay more than what they need to afford school.

Student Loans How Much Can I Borrow

Student Loan Amount

The amount of student loan you qualify for depends on many factors including your current credit score, level of education, income, employment status, number of dependents, etc. If you have any questions about how much money you may be able to borrow or what types of loans may be best suited for you, contact your lender(s) directly. You can find out information on the interest rates, terms, costs, and repayment options associated with different loans at www.studentloans.gov. In addition, you may want to consider taking advantage of federal student aid programs. By doing so, you could receive additional funds to help pay for college expenses. Find out how to get free money for school at www.finaid.org.

Repayment Term

Your payment term will determine how long it takes to repay your student loans. When picking a repayment plan, you need to take future earnings and financial circumstances into account. A longer payment term means more time to repay your debt. However, if you choose a shorter repayment term, you’ll end up making smaller monthly payments throughout the course of your loan duration. Generally speaking, the average length of a repayment period is 10 years, although some people choose a 15 year or 20 year repayment term.

Interest Rate

Interest rate is the yearly cost of lending money to students. You should know that higher interest rates mean more money owed over a fixed period of time. However, lower interest rates mean fewer dollars paid each month during the same amount of time. Before choosing a repayment term, make sure to understand your interest rate (or APR.) This will ensure that you do not increase your borrowing amount just to reduce your monthly payments by increasing the loan term. On the other hand, a longer term might allow you to save money in the end.

Private Vs Federal Loans

Private and federally subsidized student loans are two of the most popular types of student loans. Both types provide funding for educational purposes but often charge borrowers different fees and interest rates. There are pros and cons to both types of loans. Private loans allow you to borrow larger amounts than those offered by the government. However, private loans may also carry higher interest rates, depending on the type of loan you choose. Government-subsidized loans offer low interest rates but are only available to students who meet specific qualifications.

Student Loans How Much Can I Borrow

You may have many questions about student loans. What types exist? Who am I most likely to borrow money from? Which schools offer the best financial aid packages? Where do I start if I want to apply for loans? When should I start thinking about paying my loans back? These are just some of the questions students ask themselves when they’re looking at how much they can borrow and what they need to know before borrowing. There are two different types of federal student loans — direct subsidized and direct unsubsidized. Direct Subsidized Loans (DSL) are considered “need-based” loans. The government makes them easier to get than Unsubsidized Loans (USL). You don’t have to prove that you can afford to pay them back. However, you don’t get any interest while you’re enrolled in school. Your loan payments go directly to your school. Your lender may make their own rules about how long you have to pay off your loans. In general, it takes 10 years after graduation to fully repay a DSL loan. Your loan payment may change depending on whether you choose to take out a consolidation loan to help pay down your debt faster. If you decide not to consolidate, you’ll be responsible for making regular monthly payments until your loan is paid off. If you decide to consolidate, your monthly payment will be lower and you’ll only have to make one set of payments over several months until your balance is completely paid off.

Unsubsidized Loans (also called private loans) are considered “non-need based” loans. Unlike a DSL loan, you don’ t have to show that you can afford to repay your loan. Most people who use these loans borrow less than $20,000. A high percentage of them default on their loans. Your lender collects interest on your loan every month until your entire principal is repaid. Private loan lenders aren’t federally regulated. So, your lender isn’t bound by the same rules as a DSEL lender. Your loan terms will vary widely depending on whether you qualify for a fixed rate or variable rate loan. If you’re going to take out a private loan, you’ll want to shop around and compare rates. Don’t forget to check the APR. This stands for annual percentage rate and tells you how much interest you’ll pay each year on your loan. You can also look at the total cost of the loan. The average cost of an undergraduate education in 2017 was nearly $30,000. That means that you’ll be paying interest while you’ve been in college — even though you aren’t earning any income. Remember to keep track of your net-worth. You’ll want to subtract your current assets from your debts to determine how close you are to being financially stable.

While you could probably take out more than the maximum number of loans allowed, there are downsides to doing so. Repayment plans that allow you to pay more than 20% of your discretionary income per month mean that you won’t have enough left over to save for retirement, buy a home, or contribute money to a 529 plan. Be sure to evaluate your finances before you sign anything.

If you’re planning on attending school full time and taking out loans, then you might consider using a combination of both types of loans. Both types of loans have pros and cons, so it’s good to weigh everything carefully before you commit yourself to either.

For additional information on student loans, visit StudentAid.gov.

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