Student Loans

Student loans are offered to those who are looking to pay for higher education expenses. Typically these help cover items such as tuition, room and board, books, and transportation.

Federal
Federal student loans are given by the government after completing FAFSA, and offer a few perks that private student loans may not offer. With federal student loans, payments are not due until after you graduate, you drop out, or change your enrollment status to part-time. Interest rates are often lower than private student loans and are fixed rate, meaning you will not have to worry about your interest rate increasing at any point. The interest you pay on your student loans may be tax deductible.

Federal student loans also offer a wide array of repayment options as well as the potential to defer your payment. Federal student loans do not charge a prepayment penalty fee, so you can pay off your student loans as quickly as you want. Depending on what line of work you go into, you may be eligible to have some, or all of your student loans forgiven.

With the exception of the PLUS loan, your credit is not checked to qualify. This means even if you have a bad credit score, you may still qualify for a federal student loan.

Private
Private student loans are provided by private organizations like banks, credit unions, or state organizations. Often times, private student loans require payments be made while you are still in school. Private student loans also can have variable interest rates, in addition to fixed rates, and may be higher than the interest rate on federal loans. Similarly to federal student loans, interest paid on private student loans may be tax deductible.

Since the terms and conditions of private student loans are set and determined by the lender that holds them, their options on repayment plans, penalties, and loan forgiveness may vary.

Unlike federal student loans, most private student loans require a credit check and may even require a cosigner to get approved.

Subsidized
Subsidized loans are offered to undergraduate students who have financial needs. The amount in subsidized loans you receive is based on how much help the Department of Education expects you to receive for education costs from family, grants and scholarships. Subsidized loans do not accrue interest until you graduate or are a part-time student.

Unsubsidized
Unsubsidized loans are offered to both undergraduate and graduate students and do not have a financial need requirement. Unlike subsidized loans, unsubsidized loans do accrue interest while you are in school.

How your student loans get repaid and when is based off of the type of student loans you have. For federal student loans, payment begins once you graduate, drop below half-time enrollment, or leave school. Private loans depend on the terms that are set by the loan provider, but in most cases you must start paying once the money is disbursed to you. In some cases, with certain federal loans, you have a six-month grace period after you leave school before you need to start making payments.

With federal student loans, your loan servicer automatically sets your repayment schedule to the standard payment plan, however there are many repayment plans available including income-driven and graduated payment plans. Private student loan lenders may also offer a variety of repayment or deferment options. To find out what they offer, they need to be contacted. When making payments on your student loans, you will want to reach out to your loan provider/servicer to find out where and to whom the payments should be sent. It is easiest to set up automatic payments if you can, and in some cases, you may even get a lower interest rate if you set up reoccurring automatic payments.

If you are having difficulty repaying your student loans, or do not think you can continue making payments, it is important to contact your loan provider or servicer as soon as possible. You may be able to have your repayment plan changed or request deferment until you are financially able to make payments. You want to avoid your student loans defaulting. Defaulting on these loans will negatively impact your credit score and may make it harder to obtain loans of any kind in the future.