What Student Loans Do I Have?

This video was designed to give students an overview of what student loans do, how they work, and how much debt they should expect to have when starting college. Students often want to know about their options when applying for private loan, federal loan, or state loan. Depending on where you go to school and what degree program you decide to pursue, you may qualify for different types of loans. Private loans require no credit score, while government loans generally require at least a 620 FICO score. State loans may not require any credit history whatsoever. You may also be eligible for PLUS loan if your parents co-signed your loan, and Perkins loan if you attend an accredited non-profit institution. Federal loan minimum requirements are less than $5,500, and Stafford loan limits are nearly $120,000. There is a wide range of possibilities depending on your financial situation, so talk to your family, friends, and counselor in order to make the right decision for you.

What Student Loans Do I Have?

Private student loans

Private student loan debt comes in many different types. If you have federal student loans, then those are the only type of private student loan debt you should pay off first. Private student loans are not federally guaranteed, so they aren’t backed by the US government. There are three major categories of private student loans: consolidation, private education loans, and private credit cards.

Consolidation

This is where you take out one loan and use it to pay down several others. Consolidating your loans may lower your monthly payments, but it will increase your total amount owed. You’ll still be responsible for paying back each individual loan plus interest.

Education Loan

An education loan is a loan taken out to cover tuition at a school. These loans often allow you to transfer them to a bank account once you graduate, though sometimes banks don’t accept these types of loans. Education loans are commonly taken out by parents who want their children to get a college degree, or by students themselves if they have no parental help.

Credit Card

A credit card is a great way to build credit, but using it to make purchases could cause you to incur more debt than you would otherwise. Be sure to always pay off your balance before any fees. Many times you won’t even notice the fee until months later. Credit cards also carry higher rates than traditional loans, making them harder to repay.

Federal student loans

Federal student loans include Stafford, Perkins, PLUS, and subsidized loans. Federal loans are what most people think of when they hear about student loans. While they can be helpful, they’re also notorious for causing lots of problems.

Stafford Loans

The Stafford Loan Program was created by Congress in 1965 to help low-income families afford college. It offers two kinds of loans: Direct and Subsidized. A Direct Stafford Loan requires borrowers to go directly to the lender to apply. Borrowers often choose direct loans over subsidized ones because they are less expensive. However, direct loans also require repayment over 20 years, while subsidized loans are generally paid back over 10 years.

Perkins Loans

These loans were intended for students attending vocational schools or community colleges. Perkins Loans are rarely offered now, but they were once common. A student could receive these loans by having a parent co-sign the loan document. Most Perkins Loans have a fixed rate of 6 percent.

What Student Loans Do I Have?

Student loans are a big deal. The biggest concern many students have is getting their student loans paid off while they are still in school.

You may ask yourself what does my loan look like? What do I owe? How much money will I receive back per month? Will I ever pay this off? Are these questions you should be asking yourself?

Let’s start at the beginning… where you got your first loan. If it was a private lender then you probably signed some paperwork stating that you would repay them. But did you actually read those papers? Did you understand the terms and conditions? Were you even asked if you understood the terms and conditions? No. That’s right – you weren’t even asked whether you understood the terms and condition. You just had to sign something saying that you agree to the terms. So, who owns the debt? Not you! Just make sure that you get a copy of the contract before signing anything.

Then let’s talk about your second loan. Maybe you took out a loan from a bank, credit union or maybe you got a government backed loan from the federal government. Regardless of how you obtained the loan, did you really review the terms and conditions? Probably not. Again, you were given a piece of paper to sign and no time to think about it.

In college, you will be borrowing quite a bit of money. You’ll need to borrow $10-$15 thousand dollars to cover tuition, books, room and board. Add another $10-20 thousand dollars if you want to cover personal expenses like phone bills, laundry, food, entertainment, etc. Now multiply that number by four years. You’re going to spend $40+ thousand dollars in student loans. If you only borrowed $20 thousand dollars, you’d have over $100 thousand dollars left to live on!

But wait…what happens after you graduate and begin working? Even if you’re lucky enough to land a job that pays well (which is rare), you won’t be putting any money towards paying down your loan. In fact, your monthly payment might go up slightly once you start making more money. And since your salary doesn’t change, your monthly payment stays the same. This means that over time you’ll end up paying more than the original amount you borrowed.

So here it comes… the bad news. As long as you’ve been carrying this debt, the interest rate hasn’t changed. Your payments have gone up, but the interest rate has stayed constant. In the past few years, the interest rates have risen meaning that the amount of money you owe each year has increased faster than your salary has.

When you add in the interest rate hike, the amount you owe gets bigger and bigger each year. Unless you plan to work forever, you shouldn’t expect to pay off your entire student loan.

There are two options you have. First, you could choose to defer your loan payments until you’re 30 years old. At that point, you’ll be able to consolidate your loans under one account. Second, you could take advantage of loan forgiveness programs offered by certain schools.

If you decide to opt for the latter option, you’ll want to contact your financial aid office to find out exactly what types of repayment plans are available. There are different repayment plans based on the type of loan you have and the amount of your income.

These are just a couple ideas to help you get started thinking about your future and how you will manage your student loan burden. Hopefully, this article will help you gain some insight into the loan situation. Good luck!

What Student Loans Do I Have?

Students have almost $31 billion in student loan debt after they graduate. Students who get loans have to pay them back over time and may even have to make payments on their loan if they don’t do well at school. Many students start out with no idea what their monthly payment would be, and then once they get their first job, they find out how much money they actually need to pay each month to keep their interest rates low. While some people think that student loans aren’t necessary, many experts say that without them, college wouldn’t be affordable for everyone.

Here’s a list of possible student loan types you might have:

Federal Direct Loans – These are government backed loans that allow you to borrow money from the federal government to cover tuition, books, room and board. You repay these loans while working. If you default on the loans, you’ll end up missing payments and having your credit history tarnished (if not ruined).

Private loans – Private lenders offer private student loans that require fewer documents than federal loans. However, private student loans tend to carry higher interest rates than federal loans.

Parental PLUS loans – Parents can borrow money to help pay for their child’s education. The amount borrowed is added onto your own balance and repaid whenever you receive your paycheck. There are two parts to the PLUS Loan; parent PLUS loans and grandparent PLUS loans.

Perkins Loans – These loans are for children enrolled in postsecondary vocational training programs, also known as trade schools, apprenticeship programs, and GED programs.

Stafford Loans – Also referred to as subsidized loans, the government backs these loans. The loans are guaranteed by the U.S. Department of Education. After you complete your program, you’ll begin repaying your loans immediately upon graduation. However, if you work full-time jobs during your schooling, you won’t have to make any payments until six months after graduating.

If you’re in need of financial assistance, you should look into federal loans first before turning to private lenders. If you take out a private loan, make sure you understand the terms and conditions of the contract.

What Student Loans Do I Have?

Federal Direct Stafford Loan (Subsidized)

A subsidized loan means that you do not have to pay interest while enrolled in school. When you graduate, the remaining loan balance becomes interest free. If you default on the loan, the U.S. government pays any accrued interest back to you. You may borrow a maximum amount of $23,000 per year. In addition, private student loans may cost twice the rate of federal loans.

Federal Perkins Loan

This type of loan requires repayment while you are enrolled in school. Upon graduation, the remainder of your loan balance remains unpaid. You may borrow a total amount of at least $10,250 for each academic year. Private student loans may cost twice as much as federal loans.

Parent PLUS Loan

This loan is only available if both parents are applying. You cannot borrow the full amount while still attending high school. After graduating, you may borrow up to four times the original amount borrowed. Your parent(s) must co-sign the loan. Once the child reaches age 23, he/she is responsible for paying off the entire loan. Private student loans may charge upwards of three times the cost of federal loans.

Private Student Loans

These types of loans are generally used for undergraduate college. Private student loans are unsecured and they don’t require parental co-signing. You may borrow up to the limit allowed by federal law plus about 10 percent extra. Private student loans are attractive because they allow you to use them to pay for things other than tuition costs. However, you still face higher rates than federal loans.

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