Student Loans

Given the cost of a higher education, most people fund their college careers with student loans. Using either federal or private student loans as a means to obtain a degree, students can postpone the bulk of their college costs until after they graduate and have a better opportunity to secure a high-paying job.

To see what sort of student loans you qualify for, please begin the free form to the left. We will put you in contact with services to help you secure federal college financing or if you’re interested in private student loans, we will get multiple lenders to present you with their own unique offers for you to choose from. That way, it’s the lenders fighting for your business and not the other way around.

If you’d rather learn more about student loans before delving into the process of selecting a lender, please continue reading or explore the various articles, FAQs, and studies found on our website.

Types of Student Loans

There are two primary types of student loans: private and federal.

Private student loans are offered by large banks or other private lenders. Since they’re backed by private money, they typically come with slightly higher of interest rates than their federal counterparts. However, they’re also easier qualify for than government loans since their added costs provides lenders with added security.

Federal student loans are those offered or subsidized by the government. While private college financing is pretty straightforward, trying to select one of the many types of federal student loans can be a daunting task. Here’s a quick list and short description of the main types of government-backed college loans available:

  • Perkins
  • Direct Subsidized
  • Direct Unsubsidized
  • Direct PLUS
  • Consolidation
Perkins Loans

Perkins Loans are available to both undergraduate and graduate students alike, and are widely considered the most “preferred” type of student loan out there. They’re desired so highly because they lack origination and default fees. Additionally, their interest rates can be set as low as 5 percent and come with a lengthy 10-year repayment period. But due to these advantages, Perkins Loans are a little more difficult to qualify for than some other options out there.

Direct Subsidized Loans & Direct Unsubsidized Loans

Direct Subsidized Loans and Direct Unsubsidized Loans are some of the cheapest college financing options available — but this attractive perk is countered by how exclusive they are.

Direct Subsidized loans are types of financing that’s partially covered (hence the “subsidized” title) by the federal government. The subsidy comes in the form of the government fronting the bill for all interest that’s accrued on these loans while a student is enrolled in college. But the reason why the government subsidizes these loans is because they’re meant for college-goers who demonstrate a need for financial aid. Most recipients of these cheap student loans come from families whose adjusted gross income (AGI) is less than $50,000.

Unsubsidized Direct Loans are also relatively cheap, and they’re easier to qualify for since they’re open to applicants of all financial backgrounds, but they accrue interest from their inception.

Direct PLUS Loans

Direct PLUS Loans are specially designed higher-education loans that help students pay not only for tuition, but also for other school-related necessities like books, supplies, equipment, and even transportation.

There are two groups that Direct PLUS Loans cater to: parents and graduate students.

Parent PLUS loans are borrowed by parents on behalf of their children. These affordable loans are available only to a student’s biological parents, adoptive parents, stepparents, or legal guardians.

Grad PLUS Loans are only available to graduate students who are pursuing Master’s Degrees, Doctorate Degrees, or some post-baccalaureate degrees.

All Direct PLUS Loans come with a fixed 7.9 percent interest rate, and interest begins accruing immediately upon the financing being transferred to a borrower’s school.

Federal Consolidation Loans

Consolidation loans are tools that allow borrowers to take multiple existing loans and merge them together under a single loan. The benefits to consolidating are varied, but most people choose to consolidate in order to:

  • Have only a single monthly bill to worry about
  • Lower the cost of monthly payments
  • Refinance high-interest student loans
  • Reduce their overall interest costs by extending their term

Consolidating one’s college financing can extend repayment periods by up to 30 years. While this is a long period of time, this term extension usually results in a lower interest rate and lower monthly payment. Plus, consolidation loans can always be paid off early in the event a borrower comes into money or acquires a high paying job at some point in the future.

What Can You Use Student Loans For?

Regardless of where a borrower takes a loan out, tuition tends to be the most common use for student loans. However, tuition is not the only expense that college loans can be used for. Depending on what type of financing a student or parent qualifies for, they may be able to use their borrowed money for:

  • Tuition
  • Room and board
  • Books
  • Transportation
  • Normal living expenses
  • International programs

If you’re hoping to have some extra money for those above-mentioned expenses, speak with your lender before agreeing to borrow money to make sure your particular loan can be used for expenses other than tuition.

Applying and Qualifying for Student Loans

If you’re wondering how to get a student loan, it all depends on whether you want a private or federal student loan. The application and qualification process for college loans varies depending on whether you’re seeking money from the government or from private lenders.

How to get Private Student Loans

Private student loans usually only require a simple application that can be completed in a matter of minutes. Then after submitting a completed application, the student will be contacted by the private lender and told whether or not they qualify for their requested money.

One major benefit of private student loans is that applicants with poor credit, or even no credit history, are not automatically disqualified. In fact, bad credit applicants are often considered and accepted. While they may be offered higher-than-average interest rates, there are online services that will allow applicants to compare rates from multiple lenders at once.

That way they can ensure themselves that they’re agreeing to the best offered rate from a pool of multiple private lenders.

How to get Federal Student Loans

Federal student loans, on the other hand, take a few more steps.

Students who want to borrow government-backed money must fill out the Free Application for Federal Student Aid (FAFSA).

The FAFSA is a free form that the government provides, but there are companies that provide paid services to help students fill out the form in the event they wish to have guidance.

The government requires the FAFSA from each federal student loan applicant so that the government can determine what sort of loan each student qualifies for. For instance, some types of federal student loans are available only to those who come from families with lower-than-average financial backgrounds.

The FAFSA is also used to determine eligibility for financial aid and grants, so it’s in students’ best interests to fill out a FAFSA every year they’re in college, even if they only plan to use private student loans to finance their education.

Student Loan Interest Rates and Costs

Before ever applying, the inevitable question that pops into all prospective college borrowers’ minds is “How much do student loans cost?”

Unfortunately, there is no one-size-fits-all answer to this question. Instead, it all depends on what type of student loan lender a borrower is dealing with and what type of student loans that borrower actually takes out.

For example, private student loans tend to come with fixed interest rates that remain exactly the same throughout the duration of the financing’s lifetime. So student borrowers know exactly how much their monthly bill will be from the time they take out their loan to the time they finish paying it off.

Federal student loans used to be the same (and some types still are), but recent changes made the interest rates on government student loans now rely on variable indexes. That means that the rates on federal student loans can now fluctuate or “adjust” as the indexes they’re tied to move up or down (much like adjustable rate mortgage loans).

When the respective indexes are low, so too will the interest rates on these federal student loans. But when those indexes shoot upward, students will see their own interest rates climb as well. Consequently, their monthly bills will also grow.

Fortunately, there are caps on these interest rates in the event their indexes skyrocket out-of-control. There’s a cap of 8.25 percent interest for undergraduate student borrowers, 9.5 percent interest for graduate student borrowers, and 10.5 percent interest for parent borrowers.

The Repayment Process

The worst part about student loans is that they must eventually be repaid. But again, not all student loans are the same, and that holds true for how they get repaid as well.

Private student loans usually require that repayment begin immediately. So if a borrower takes out money from a private lender today, they can expect to see their first bill for that loan in one month’s time.

Federal student loans, however, usually allow borrowers to hold off on repayments until after they graduate. This benefit is invaluable to students who will be unemployed (or underemployed) during their college career.

But if a borrower is having doubts about whether or not they’ll be able to meet their monthly bills or repay their college financing altogether, there are some options to be aware of:

  • Income-Based Repayment (IBR)
  • Pay As You Earn
  • Student loan forgiveness programs
  • Refinancing
  • Deferment
Income-Based Repayment (IBR) Program

The Income-Based Repayment Program, more commonly known by its acronym, IBR, is a relatively new government-sponsored program that’s designed to help alleviate some of the burden that college-related debt is placing upon students’ and recent graduates’ shoulders.

The premise behind the program is to create a repayment plan tailored to each individual borrower based on how much they can reasonably afford when considering how much income they earn — hence, the program’s title: Income-based repayment.

Other than income earned, the IBR program also considers other income-affecting factors, such as:

  • Family size
  • Outstanding federal student loan balance
  • Adjusted gross income, or AGI
  • State of residence

Only after considering all of these factors does the IBR program conclude with a new monthly payment amount that a borrower is expected to pay.

To apply for the IBR program, you will need to contact your loan servicer.

Pay As You Earn

The Pay As Your Earn program is another government-backed program that’s central focus is to reduce the monthly payments of student loan borrowers.

However, it’s more limited than the IBR program in that eligible borrowers must demonstrate some sort of financial hardship. The ruler for determining suitable financial hardship is by looking at your monthly bill. If your monthly bill as it would be under a 10-year standard repayment plan is higher than the monthly amount you would be given under the Pay As You Earn plan, then you are considered to be experiencing financial hardship.

Additionally, your student loans must be eligible for the Pas As You Earn program. Eligible loans include:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans

Not that Direct Loans made to parents of students are ineligible.

Eligible participants of Pay As You Earn will see their monthly bills reduced, but at the expense of a longer repayment term (and thus a larger amount of overall interest when the loans are finally paid off).

Student Loan Forgiveness

Perhaps one of the hottest topics of discussion around student loans as of late is “forgiveness.” Student loan forgiveness is a term that refers to absolving borrowers of all their college-related debt.

Some try to relinquish themselves of debt by filing for bankruptcy, but student loans are rarely ever discharged through bankruptcy. However, with the nation’s growing college debt problem, the government decided they needed to provide forgiveness through some means.

Their solution is to reward those who make consistent payments on their debt and those who serve the public.

If a borrower makes at least the minimum payment on their student loans for 20 years, they will see their remaining federal loans completely forgiven.

That 20-year deadline can be reduced down to 10 years if the borrower works in public service and makes consistent payments for those full 10 years.

Jobs that are eligible for the Public Service Loan Forgiveness program include, but are not limited to:

  • Teachers at public schools
  • Law enforcement services
  • Public and school library services
  • Early childhood education
  • Military service
  • Public safety services

For more information on qualifying for student loan forgiveness, read this article.

Refinancing

Another useful way to reduce monthly payments is by refinancing your student loan. Refinancing is a term used to describe taking out a new loan with more favorable terms to pay off an existing loan.

For instance, imagine a borrower who has an education loan with a 7 percent interest rate and a 10-year term. If that student could take out a new 10-year loan at 5 percent interest, then they will not only see a lower monthly bill, but they’ll also pay less over the entire lifetime of the loan.

In that sense, student loan refinances are very similar to mortgage refinances. They essentially give qualified borrowers a “better” or more favorable loan. But they differ from their mortgage-counterparts in that college-related refinances cannot be used to extract “equity” from your existing loan. They’re only used to relieve borrower’s of debt burdens derived from loans taken out when they were less-qualified applicants.

Deferment

Deferring college loans refers to the practice of putting payments on hold. Most of the time, deferment periods last between six months and one year, but it’s possible to secure an extended deferment time.

There are a variety of reasons that one may defer their loans, but the most common are due to:

  • Unemployment
  • Disability
  • Working as an intern
  • Economic hardship
  • Currently attending school

If you’re wondering how to defer your student loans, you will need to contact your lender or loan servicer directly to discuss the possibilities available.

Beware, however, that deferred loans still accrue interest. So while you may defer your financing obligations, their overall cost will be growing during that period of stunted payments.

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