Everything You Need to Know About Student Loans: So the time has come in our guide to getting good with money and to talk about the things that none of us really want to talk about, which is student loans.
If student loans are a part of your life at least take solace in the fact that you are very far.
Know More About Student Loans
From a loan of the class of 2022, higher than 69% took out loans of some kind with an average debt burden on graduation totaling just shy of more than $30,000. For the vast majority of students, college loans are a reality they must face and it’s better to know what you’re getting into before you find yourself at the end of the college experience.
For most of the loans available to you, you will have to do something called an exit counseling session where you will have to read about your loan and answer questions about it, usually around things like the terms of the repayment to make sure that you understand what you’re Getting into.
But many of us just don’t take those exit counseling seriously or even if we do, they’re often too little too late and no matter where you are in the student loan process.
For example: even if you’ve already taken out student loans, it’s never too late to learn more about what that entails and if you’re in a place where you have the option to take out potentially less in student loans in the future or even sometimes avoid them altogether. it’s really Important to know your options.
Fully Understanding of What is Student Loans?
student loans are just one part of an overall financial package that will often entail other categories like grants scholarships
- Merit-based Awards
- Work-study programs
- Grants scholarships
for most students, they make up part of the pie of how they’re financing college, and hopefully for many students are not the overwhelming majority.
How to Pay Back Student Loans
In most cases, you will not need to start paying back your student loans immediately. but you should be very much keep in mind when you are expected to start repaying them and keep that date clearly in your other financial planning, as well as in many cases of life planning.
For a lot of students, it will be something like six months (6) after graduation that repayments starts kicking in. but there are other ways to defer the loan repayments more on that later.
Best Types of Student Loans
Kind of student loans you have there are two main types of student loans that you can take out.
- Private loans
- Federal loans
#1. Private loans
Private loans are any loans given by a lender other than the government including businesses, banks, credit unions and the school you’re attending itself. the terms of the loans are set by the lender and can vary widely between different loan providers.
Private loans can have variable or fixed interest rates which means that your Interest rate can be dependent on your or your parent’s credit score or other co-signers. private loans are also typically unsubsidized which means that you’re responsible for all the interest that accrues on your loan including the interest that accrues while in school. private loans are taken out with a set repayment term usually anywhere from five to twenty years and are typically not eligible for student loan forgiveness programs or government backed repayment programs designed to lower your monthly cost.
and again, keep in mind that private loans can have interest rates that can change over the course of your loan repayment, you might start with a very low 3% interest rate and only to find yourself paying a double-digit 13% after a few years.
additionally, private loans can be Refinanced, meaning you can try to get a lower interest rate depending on your score salary and other factors. they can be a gamble that you can win or lose.
#2. Federal loans
for comparison federal student loan interest rates for undergraduate students are usually no greater than 5%. federal loans as their name implies.
Federal loans are loans funded by the federal government, there are three types of federal student loans for undergraduates.
Types of Federal Student Loans for Undergraduates.
- Direct subsidized loans
- Direct unsubsidized loans
- Direct PLUS loans
#1. Direct subsidized loans
Subsidized means that the government Pays the interest that accrues on your loans while you’re in school or deferment
#2. Direct unsubsidized loans
Unsubsidized loans accrue interest that you will eventually have to repay even while in school
#3. Direct PLUS loans
PLUS loans are taken out by your parents and are repaid by your parents even though they’re taken out for you to get federal student loans. you have to fill out a FAFSA form or a free application for federal student aid.
Considerations for student Loans
It is important to remember that all federal student loans Have a fixed interest rate.
Currently, that fixed interest rate for undergraduates is four point five three percent (4.5, 3%) also except for PLUS loans you do not need to submit to a credit check for a federal loan because the interest rate is fixed and does not depend on your credit score.
Most importantly for federal loans, there are many options to you for repayment and even postponement in terms of financial difficulty,
so now that Understand the types of student loans that are generally available to us, it’s important to consider all of the options when repaying the loans.
Many students are going to get into a regular payment plan with various loans where they’re meeting some amount, hopefully, higher than the minimum to help chip away at the principal and the interest.
in as a reasonable way as we can while balancing our other financial goals. but there are many other nuanced options when it comes to repayment plans throughout your adulthood for example with private student loans you can start repaying them while you’re in the school which can potentially save you thousands of dollars in the long run after graduation. you’ll start to make principal and interest payments every month the amount that you’re paying every month will be determined by a few factors things as your interest rate, and accrued interest.
How Biden’s student loan forgiveness program will work
In 2022, President Biden unveiled his administration’s plan to cancel billions of dollars in student loan debt, the plan will cancel loans for borrowers making less than 125 thousand dollars ($125,000) a year including twenty thousand for Pell Grant recipients.
The Federal Loan payment pause is also being extended through the end of the year 2022.
Mr. Biden said his student loan policy “will do more than just take away debt from those who need It most but will help Americans for years to come, I believe my plan is responsible and fair it focuses the benefit on middle class and Working Families, it helps both current and future borrowers and will fix a badly broken system”.
