Student Loans

Standard Repayment Plan: This is the default plan, where you pay a fixed amount each month for the loan term, typically 10 years. It's straightforward and usually results in the least amount of interest paid over time.

Graduated Repayment Plan: Ideal for those expecting their income to increase over time, this plan starts with lower payments that gradually increase, usually every two years. While you might pay more interest over time compared to the standard plan, it can ease your initial financial burden.

Income-Driven Repayment Plans: These plans adjust your monthly payments based on your income and family size. They're designed to be affordable, with payments recalculated each year. While they can extend your loan term and potentially increase the total interest paid, they offer a safety net if your income fluctuates.

Distinguish between needs and wants. Needs are essentials like tuition and textbooks, while wants might include a more expensive dorm room or lifestyle choices. Prioritize your needs to minimize borrowing.

Understand the total cost of a loan. This isn't just the amount you borrow; it includes interest, fees, and the loan term. A longer repayment period might reduce your monthly payment, but it increases the total interest paid over time. Use our transparent loan calculators to see the full picture.

The four main categories of student loans are Federal Direct Subsidized, Federal Direct Unsubsidized, Federal Direct PLUS, and private student loans. Each has its own set of loan terms, interest rates, borrowing limits, and other unique features.

Federal Direct Subsidized Loans are designed for undergraduate students demonstrating financial need. The government covers the interest while you're in school at least half-time, during the six-month grace period after graduation, and during any deferment periods. This benefit makes them a cost-effective choice if you qualify.

Federal Direct Unsubsidized Loans are available to both undergraduates and graduates, with no requirement to demonstrate financial need. With this loan, you're responsible for all the interest that accumulates, even while you're in school or during grace and deferment periods. You can opt to pay the interest as it accrues or let it add up and capitalize on the principal amount.

Federal PLUS Loans cater to graduate or professional students, as well as parents of dependent undergrads, covering educational costs that other aid doesn't meet. These require a credit check and generally come with higher interest rates and origination fees than Direct subsidized and unsubsidized loans.

Private Student Loans are provided by banks, credit unions, and other private lenders. Their interest rates and terms can vary, often influenced by your credit score.

There are a few key steps when applying for student loans, and the time it takes to receive the funds can vary based on the type of loan. When applying for federal loans, follow these steps:

1. Complete the FAFSA. The Free Application for Federal Student Aid, or FAFSA, is the first step since it determines your eligibility for federal loans. You need to complete it every year to qualify for federal aid.
2. Review Your Aid Offer. After processing your FAFSA, your school will send you a financial aid offer, which may include federal loans. This often happens a few weeks to months after submission, depending on the school and when you apply.
3. Accept the Loan. Decide how much you want to borrow and accept the loan through your school's financial aid office.

Applying for private student loans requires a slightly different approach. Here are the necessary steps:

1. Choose a Lender. Shop around to find the best terms, then choose the lender that best suits your situation.
2. Apply Directly. Apply directly through the lender, which typically involves a credit check and income review.
3. Certification by School. The lender will contact your school to certify your eligibility and the loan amount.

The disbursement of student loan money generally coincides with the start of the semester, but it can take several weeks from the time you accept the loan offer. That's why it is important to apply early to ensure that funds are available and sent to the school when you need them.

Adding a cosigner to a student loan application, especially for private loans, can offer significant benefits, including:

• Improved Approval Odds: Private lenders often require a strong credit history and reliable income, which many students lack. Having a cosigner with a solid credit background can increase the likelihood of loan approval.
• Better Interest Rates: A cosigner with a high credit score can even help you secure a lower interest rate. Since interest significantly affects the overall amount you'll pay back, a lower rate can save you a lot of money over the life of the loan.
• Building Credit: For many students, having a cosigner can also be an opportunity to build credit. Having a cosigner help you qualify means your name is listed on the loan. Any positive repayment history can help the student start to build credit history.

For these reasons, a cosigner not only enhances the terms of the loan but also provides a safety net, making lenders more comfortable with extending credit.

Student loans are designed to help cover the various costs associated with higher education. The goal is to give students the necessary funds to successfully complete their studies. The range of expenses that can be covered by both federal and private student loans is quite broad, encompassing more than just tuition. Here are some of the eligible expenses:

• Tuition and Fees
• On or off campus housing
• Meal plans or groceries
• Books and Supplies
• Transportation to and from school

Understanding what student loans cover helps in budgeting and ensures that funds are used appropriately.

When taking out private student loans, you often have the choice between fixed and variable interest rates. Understanding the differences between these two can help you make a financially sound decision.

Fixed interest rates remain the same rate for the life of the loan. This consistency makes budgeting easier because you know exactly how much you will pay each month, regardless of changes in the market or economy. Fixed rates typically start higher than variable rates but provide predictability and protection against rate increases.

Variable interest rates, on the other hand, change over time based on an underlying benchmark or market index that reflects broader economic conditions. This means your monthly payments could increase or decrease. Initially, variable rates are often lower than fixed rates, potentially saving money if rates remain stable or decrease over time. However, they also pose a risk if rates rise significantly.

Choosing the best option depends on your financial outlook and risk tolerance. If you prefer stability and can handle potentially higher initial costs, a fixed rate might be better. If you can manage some risk and believe that interest rates will not drastically increase, or you plan to pay off your loan quickly, a variable rate could save money in the long run.

The repayment period for student loans varies by type and chosen plan. Federal student loans generally offer a standard 10-year repayment period, but this can extend to 25 years with options like the Extended Repayment Plan or Income-Driven Repayment Plans. Private student loans, on the other hand, feature varying terms from 5 to 20 years based on lender agreements and borrower credit. Understanding and selecting the right repayment plan is crucial to ensure you can repay the loan.