Student loans are a common and convenient source of funding used by many students and families to help pay for college. Taking out student loans to help you afford college can be a very wise investment. With that said, it is important to carefully consider how much you borrow each year as student loans are not free money and they will need to be paid back with interest.
Think carefully about how much money you need to borrow. Start by developing a realistic budget and consider ways to lower your costs without borrowing. You might also wish to research the average pay of your chosen field to know if your projected earnings will be enough to repay your student loans. Borrow only what you need and can reasonably repay.
Before your loan repayment begins, it is important that you have a plan to stay on track. By understanding the repayment details of your loan, you can prepare yourself to pay your loan on time and in full. There are several questions for you to consider:
To qualify for a loan, first complete the Free Application for Federal Student Aid, or FAFSA. There are two types of federal student loans:
- Subsidized loans based on financial need; the federal government pays the interest that accrues while you are in school.
- Unsubsidized loans are not based on need. The interest that accrues while in school must either be paid monthly or deferred and added to the original loan balance.
- Subsidized loans are only available for undergraduate education, while unsubsidized are available for both undergraduate and graduate.
For the 2021-2022 academic year the interest rate for Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduate borrowers is 3.73%
For the 2021-2022 academic year the interest rate for Direct Unsubsidized Loans is 5.28%
Before considering private student loans, be sure your federal student loan eligibility is maximized.
The terms and conditions of these credit-based private loan programs vary, and students are encouraged to review the details carefully.
In addition to these loans, if you are a dependent student your parents may also qualify for a Parent PLUS loan.