Student Loans
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Student Loans
College tuition costs have increased consistently year after year. In fact, the most expensive schools now charge between $50-$60k per year for tuition according to the College Board. To cover this massive expense, students and families use student loans to help finance post-secondary education costs including tuition, room and board, books, and additional living expenses.
After you’ve exhausted all scholarships, grants, and federal student loans, private student loans can be used to fill the gap in your financing needs. When shopping for private student loans, it’s important to make sure you find a loan with interest rates, repayment terms, and other details that matter to you.
Federal Student Loans
US students who attend qualifying post-secondary schools may be eligible to request loans from the federal government through the Department of Education. Federal student loan payments are automatically deferred while a student is in school at least half-time. After graduation or if a student drops below half-time, federal loans allow for a six-month grace period before entering repayment. Some undergraduate federal student loans are subsidized, which means the government will pay the interest accrued while the borrower is still an active student. Parents may also request loans for their children’s academic expenses through the Direct PLUS Loan program.
In order to apply for federal student loans, students must file a FAFSA before the deadline. For the 2018-2019 academic year, the federal FAFSA deadline is June 30, 2019. The FAFSA open date for the 2019-2020 academic year is October 1, 2019. It’s wise to apply as soon as the FAFSA opens in order to capture the most available aid dollars.
Federal loans also feature repayment assistance programs that are available to students with financial hardships that struggle to make payments after graduation, including payment deferment, income-based repayment plans, and even loan forgiveness.
Private Student Loans
Different from federal student loans which are issued and guaranteed by the federal government, private student loans are backed by banks, credit unions, and other lenders. In order to get a private student loan, an application must be submitted to each lender. Lenders will then evaluate credit history, employment, and other important factors to determine eligibility and set terms on a loan. Unlike federal student loans which are uniform in nature, terms may vary widely on private student loans. Because of this wide array of private student loan products and terms, it’s important to shop around for the right loan for your unique financial situation.
Comparing Private Student Loans
When comparing private student loans, it’s important to consider the terms that you will be presented. Here are a few key terms to keep an eye on:
- Fixed vs Variable Interest Rates: As the name implies, fixed rate private student loans are locked in at a set interest rate for the entire life of the loan. Variable rate loans have interest rates that are tied to the market and so vulnerable to the market’s ebbs and flows.
- Repayment Terms: Keep a close eye on the different repayment term options. Depending on your loan application, some lenders will offer different length repayment terms ranging from 10 years to 20 years and beyond. Some lenders will offer in-school repayment terms as well or even offer forbearance support in case of financial hardship.
- Deferment: Some lenders will offer different or no deferment options.
- Application Fees: Some lenders don’t charge application or origination fees.
With private student loans coming in all shapes and sizes, we recommend you apply to multiple lenders and find the best student loan for your unique needs.
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