Student Loans

Student loans provide college students with the financial support needed to cover tuition, housing, and other educational expenses. There are two main types of student loans: federal and private. Federal student loans, offered by the U. S. Department of Education, are often the best option because they come with lower interest rates, flexible repayment plans, and borrower protections such as deferment and income-driven repayment options. Subsidized federal loans, available to students with financial need, do not accrue interest while the student is in school, while unsubsidized loans do. On the other hand, private student loans are issued by banks, credit unions, or online lenders and typically have higher interest rates and fewer repayment options.

Student loans must be repaid after graduation, although some federal loans offer grace periods before repayment begins. Repayment options vary, with standard plans requiring fixed monthly payments, while income-driven repayment plans adjust payments based on income and family size. Private loans generally have less flexibility, making it important to compare lenders before borrowing. To manage student loan debt effectively, students should only borrow what they need, understand the terms of their loans, and explore repayment strategies to minimize long-term financial burdens. By making informed decisions, students can finance their education while maintaining control over their financial future.

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What to know before applying for a student loan
- Understand the different types of loans: Federal loans are offered by the government and come with lower interest rates, flexible payment options, and borrower protections. Private loans are issued by banks or lenders, often with higher interest rates and fewer repayment options. Parent loan options such as the Federal Parent PLUS loan allow parents of dependent students to borrow up to the cost of education minus any financial aid a student receives.
- Know the difference between subsidized and unsubsidized loans: Subsidized loans allow the government to cover any interest while the student is in school. Unsubsidized loans accrue interest while the student is in school and are added to the total balance.
- Only borrow what you need: Calculate tuition, housing, and other essential costs, and avoid borrowing extra money for non-essential expenses (e.g., entertainment). Don’t forget to include any scholarships or grant monies you may receive when determining what you need to borrow.
- Check interest rates and loan terms: Federal loans typically have lower fixed interest rates, while private loans may have variable or higher fixed rates. Differences as low as a few percentage points can mean several hundred more to a loan’s balance and make it more difficult to manage monthly payments.
- Understand repayment options: Federal loans offer income-driven repayment, deferment, and loan forgiveness options. Private loans have limited repayment flexibility, making lender comparison crucial.
- Know your grace period: Federal loans usually have a six-month grace period after graduation before repayment begins, while private loans may not.
- Look for scholarships and grants first: Apply for financial aid that doesn’t require repayment to reduce the need for loans.
- Understand loan forgiveness and assistance programs: Some careers, like public service jobs, may qualify for loan forgiveness programs, reducing or eliminating debt.
- Review loan terms carefully before signing: Read all agreements carefully to understand repayment obligations, fees, and penalties. Leave yourself enough time to read agreements thoroughly before accepting the terms of any loan.
Student loan resources
Types of student loans
Federal Student Loans (offered by the U. S. Department of Education):
- Direct Subsidized Loans
  - For undergraduate students with financial need
  - Interest is paid by the government while in school and during deferment
  - Lower interest rates compared to private loans
- Direct Unsubsidized Loans
  - Available to undergraduate, graduate, and professional students
  - Not based on financial need
  - Interest accrues immediately after disbursement
- Direct PLUS Loans
  - For graduate and professional students or parents of dependent undergraduates (Parent PLUS Loans)
  - Requires a credit check and may have higher interest rates
  - Can cover the full cost of attendance minus other financial aid
- Federal Consolidation Loans
  - Allows borrowers to combine multiple federal loans into one loan with a fixed interest rate
  - Can simplify repayment but may extend the repayment period
Private Student Loans (Offered by Banks, Credit Unions, and Online Lenders):
- Undergraduate Private Student Loans
  - Designed for students who need additional funding beyond federal loan limits
  - Interest rates vary based on creditworthiness and lender terms
- Graduate & Professional Private Student Loans
  - Available for students pursuing master’s, law, medical, or other professional degrees
  - Often have higher loan limits but require a strong credit history or cosigner
- Parent Student Loans
  - Private loans taken out by parents on behalf of their child’s education
  - Typically requires strong credit and having different repayment terms from Parent PLUS loans
- Medical and Law School Loans
  - Specialized private loans for students in medical or law school
  - Often offer flexible repayment terms and grace periods
- State-based Student Loans
  - Some states offer student loans as an alternative to federal or private loans
  - May have lower interest rates or borrower benefits specific to state residents
Repaying student loans
- Know your loan type and terms
  - Identify whether you have federal or private student loans
  - Understand your interest rate, loan balance, and repayment period
- Understand your grace period
  - Federal loans typically have a six-month grace period after graduation before repayment begins
  - Private loans may have different grace periods or require immediate repayment
- Explore repayment plan options (Federal Loans)
  - Standard repayment plan: Fixed payments over 10 years
  - Income-driven repayment (IDR) plans: Adjust payments based on income and family size
  - Graduated repayment plan: Payments start low and increase over time
- Make Payments on time
  - Late or missed payments can result in fees, increased interest, and damage to your credit score
  - Set up autopay to ensure you never miss a payment (some lenders offer a discounted interest rate for autopay)
- Pay more than the minimum when possible
  - Extra payments can reduce the loan principal faster, saving you money on interest
  - Specify that extra payments go toward the principal balance
- Consider loan consolidation or refinancing
  - Federal loan consolidation: Combines multiple federal loans into one, simplifying repayment
  - Refinancing (private loans): May lower interest rates but could remove federal protections
- Understand loan forgiveness & assistance programs
  - Public service loan forgiveness (PSLF) and teacher loan forgiveness programs can reduce or eliminate loan balances
  - Some employers offer student loan repayment assistance as a job benefit
- Be aware of deferment and forbearance options
  - Deferment: Temporarily pauses payments (interest may not accrue on subsidized loans)
  - Forbearance: Temporarily reduces or pauses payments but interest continues to accrue
- Keep track of your loans and lender communication
  - Monitor your loan status through for federal loans
  - Respond to lender communications and update your contact information when if you move
- Avoid default at all costs
  - Federal loans go into default after 270 days of missed payments, leading to serious consequences like wage garnishment
  - Contact your loan servicer immediately if you’re struggling to make payments
Loan forgiveness programs
Loan forgiveness programs help college students reduce or eliminate their student loan debt by meeting specific service or repayment requirements. These programs are typically offered to individuals in public service, education, healthcare, or military careers in exchange for working in qualifying positions for a set number of years. Federal programs like Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness provide relief for borrowers who make consistent payments while working in eligible fields. Additionally, income-driven repayment (IDR) forgiveness forgives remaining loan balances after 20-25 years of qualifying payments. Some states and private organizations also offer loan forgiveness for professionals in high-need areas, such as rural healthcare.

Examples of Loan Forgiveness programs:
- Public Service Loan Forgiveness (PSLF)
  - Available for borrowers working in qualifying public service jobs (government, nonprofit organizations)
  - Requires 120 qualifying monthly payments under an income-driven repayment plan
  - Remaining loan balance is forgiven after meeting the requirements
- Teacher Loan Forgiveness Program
  - - Available for teachers working full-time in low-income schools for at least five consecutive years
    - Forgives up to $17,500 in federal student loans for highly qualified math, science, and special education teachers
- Income-Driven Repayment (IDR) Forgiveness
  - Available for borrowers enrolled in income-driven repayment plans (e.g., PAYE, REPAYE, IBR, or ICR)
  - After 20-25 years of qualifying payments, any remaining balance is forgiven
- Nurse Corps Loan Repayment Program
  - Available for nurses working in critical shortage areas or underserved communities
  - Pays up to 85% of unpaid nursing student loan debt
- Military Student Loan Forgiveness Programs
  - Several branches of the military offer loan repayment assistance, such as the Army Student Loan Repayment Program (up to $65,000) and the Navy Loan Repayment Program (up to $65,000)
- State-Specific Loan Forgiveness Programs
  - Many states offer loan forgiveness for professionals in public service, healthcare, or education
  - California has “Assumption Program of Loans for Education” (APLE) for teachers
- John R. Justice Student Loan
  - Provides loan assistance for public defenders and prosecutors who commit to working in their field for at least three years
- Rural Healthcare Loan Forgiveness Programs
  - Certain programs offer loan repayment assistance for healthcare professionals working in underserved rural areas

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Student Loans