I f you are still in college or preparing for graduation, you may not have put much thought into your student loans. Being involved in your studies and social life, and maybe even a part-time job during college may have not left much time to even think about all of the facets your loans entail. Here is a look at the different types of loans that are made readily available for students, and information about each one.
– Subsidized Loans
A subsidized loan is given by the US Federal Government, and since it is geared toward undergraduate students who show need for financial assistance, the government pays all interest on the loan while you are enrolled in college full-time, half-time, or if you qualify for a deferment or forbearance when the loan is due. After graduation, you are granted a grace period of six months, in which the interest continues to be paid by the government.
Once the six month grace period is over, you are then required to make those monthly payments. If you are unable to pay your loan at that time, you have options of either deferring your loan payments or applying for forbearance. In order to do so, you must contact your loan servicer to see if you qualify, and to understand which option is best for you.
An unsubsidized loan is also given by the US Federal Government and can be granted to undergraduate and graduate students; however, income does not come into play. Therefore, interest accrues on the loan the moment it is dispersed and is not paid by the government. You are responsible for paying the amount disbursed plus the interest when the loan comes due. Once you graduate, the interest accrued will be added to the principal payment and you will have a set amount you will need to begin paying off. An advantage of applying and receiving an unsubsidized loan is that since you do not need to show financial need like you must do with a subsidized loan. Therefore, a higher amount may be applied for and received.
-Direct PLUS Loan
Also known as a Parent PLUS Loan, this loan is helpful for parents wishing to help their child pay for tuition and other educational expenses. It is administered by the US Department of Education. A Direct PLUS Loan is borrowed by the parent, so the parent is ultimately responsible for repaying the loan as well as all of the interest. Interest begins when it is dispersed up until is six months after you, the student, graduates. Direct PLUS loans can be granted to parents of undergraduate and graduate dependent students; if you have received as much subsidized and unsubsidized loans as you are allowed, this is a viable option. An advantage of a Direct PLUS loan is that if the parent does not have an adverse credit history, the loan can be obtained up to the cost of full tuition, minus any other loans. If a parent is denied a Direct PLUS loan, you will then be eligible for an increase in unsubsidized loans with that amount being determined by the specific year you are enrolled in college.
Nothing in life is to be feared. It is only to be understood. -Marie Curie
Many students apply for a private student loan as a last resort, as a student loan of this type is not administered by the government and typically has a higher interest rate. Although it is an option, it is recommended to exhaust all other financial resources before applying and accepting a private loan. One advantage of a private student loan is that there is a wide variety of loan companies that grant private student loans. It is important to research lenders before taking the leap of this financial responsibility.
Once you become familiar with your loans, you will be further prepared to effectively pay them down. The good thing is you have many resources and options to successfully and eventually pay them off. Contacting your loan servicer and discussing your options of repayment, as well as asking any questions you have is something you are welcome to do at any time before repayment or even during repayment.
Many students of today need to depend on student loans to get them through college. If you are one of them, know that you are not alone in tackling the hefty expenses of higher education through loans. Using your money wisely by doing your very best in college, getting that sought-after degree, and landing a professional job will make it a little easier to pay them back.
Check out our Refinancing and Consolidation page to see how much money you could save each month on you student loans!