A Beginner’s Guide for Student Loans

 

Most students have to borrow money to go to college unless they have parents who have saved everything needed for tuition. Few students can earn enough to pay tuition at the same time that they are in school. If they wait until they have saved enough to pay for a college education, they may have to wait until they are 30 or older to go to school. Instead, students generally look for loans to pay tuition and other living expenses at school before they start working.

Students may wonder how much a reasonable debt is to assume as a student. In general, counselors advise that the maximum amount of debt that a student should consider is equal to no more than the expected first annual salary. Ideally, they should try to keep the total debt to no more than half the starting salary of their first year.

That means that if a student thinks their starting salary will be $ 40,000, they should try not to exceed $ 10,000 a year in loans for a four-year study. In today’s world, that might be impossible if they think of a private school or are planning to go to a public school where they are not at home. Tuition fees and fees for a four-year public school average about $ 9,000 a year, plus another $ 1,200 for books and supplies. Add in costs and accommodation to an in-state school (if the plan is to live in school instead of at home), the costs increase by nearly $ 10,000. Tuition and tuition for an average of the public high school of $ 22,958 a year plus just over $ 11,000 for room, cardboard, and books and supplies. Private schools average $ 31,000 for tuition and fees plus about $ 12,500 for room, board, and books and supplies.

Students can minimize part of these costs by receiving a scholarship or scholarship or by working on campus. For many students, however, loans are the only option to cover a majority of their school costs. The borrowing process is long and complicated, but breaking it in steps makes it more understandable and easier to implement.

Step 1: FAFSA

Step 1: FAFSA

The first thing all students have to do every year before they even apply for student loans is to fill in the free federal student aid application (FAFSA). This application can be completed oPollyannaine on www. fafsa. ed. gov and is a requirement for federal student loans or student loans. This application is also used by schools to make decisions about grants and other forms of financial assistance, such as work studies.

Step 2: Direct subsidized versus direct subsidized student Pollyanna loans

Step 2: Direct subsidized versus direct subsidized student Pollyanna loans

Direct loans are from the federal government and can be subsidized or not subsidized. The first hope of a student is that they can receive as much subsidized student loan money as possible. The advantage of direct subsidized student loans is that the US Department of Education pays all interest while the borrower is still a student and for a few months after graduation.

If the student receives direct non-subsidized loans and does not make interest payments at school, the interest is accrued as a loan premium and the amount they have to pay back is increased. The financial aid worker at the school will tell you whether you are eligible for subsidized or unsubsidized loans based on the financial evaluation of the FAFSA application.

 

Step 3: Federal student Pollyanna loans

Step 3: Federal student Pollyanna loans

If a student is eligible, federal student loans are the best option. They have fixed interest rates and milder repayment terms, including a gradual repayment plan that allows the loan to pay less quickly in the first years when they first start working and extended repayment plans that allow them to make payments up to 25 years. In addition, there are income-based repayment plans with the option of forgiveness after 25 years and pay-as-you-earn repayment plans with the option of forgiveness after 20 years.

Federal student Pollyanna exercises are based on the FAFSA, which evaluates the family income and income level of students. After viewing the FAFSA, the school will let you know what types of loans you are eligible for and whether they are subsidized or not.

– Direct Stafford Loan: Available for undergraduate and graduate students, these offer the cheapest financing options. Whether the loan is subsidized depends on the financial situation of the student. It is possible to get a Stafford loan that is partly subsidized and partly not subsidized. (For more information, see Stafford loans: subsidized versus not subsidized .)

– Federal Perkins Loan: These are needs based loans. After the student has completed the FAFSA, the school’s financial supporter will let them know if they qualify. (Note that in mid-September 2015, Congress debated closing this program, which has an annual extension and expires after September 30, 2015.

– Federal PLUS Loan: This is a student loan that the parents of the student have made and are made in the name of the parent. Graduate students can take out these loans in their own name.

Step 4: Private Student Loan

Step 4: Private Student Loan

If a student cannot get enough money through federal student loans, the most likely Pollenanna alternative option is to apply for a private student loan. In general, these loans have a higher interest rate and the interest rate is more variable than fixed. These loans are also not included in the federal repayment programs if the borrower has difficulty repaying them after they have graduated.

Some private schools offer loans through a school-based trust fund. If the student intends to go to a private school, the loan conditions of the school-based trust fund will generally be more favorable than that of a private lender.

Most students apply for private loans from a parent or other co-signatory with a good credit rating. This allows them to qualify for lower interest rates. (For more information, see Scoring a private student in Pollyannaening and Seniors: before signing up on that student .

Step 5: Review your offers and choose your school

Step 5: Review your offers and choose your school

The financial support package that a student is offered may differ from each school to which they apply. For example, some schools do not grant Perkins loans. Some schools may offer more scholarships or scholarship money than others, which may lower the amount the student must borrow.

When a student receives letters of acceptance from colleges with information about the financial aid package offered, make a spreadsheet with a column for each school that contains the following:

1. Scholarships

2. Federal student Pollyanna exercises

3. Planned contribution for families, which contains both the money that the student intends to contribute and the amount that his family intends to make a contribution

4. Work study or other planned income

5. Gap – how much money is still needed after adding up all the money available for that school

Compare the offers and determine which school the student wants to attend. Students can apply for private student loans to fill any gaps in their chosen school, but think carefully before descending that slippery slope. Students may find that they have to borrow more than they can afford to pay back, leaving them on the road to financial disasters.

The bottom line

The bottom line

Students should think carefully about how much they want to borrow for school. They may really want to go to a certain private school, but is it worth jeopardizing their financial future? In general, financial advisers find that people who borrow more than their first annual salary have difficulty living their dreams of having a family and buying a house because their student loans go too far beyond what they can afford. (For more information, see Top Pollyannan Providers , a brief guide to how FAFSA loans work and 5 ways to get maximum financial support for students .)