2 Types of Loan Student Can Choose From, Benefits of Both

How much loan student needs is identified by the total cost of schooling. Figuring out how the pieces fit together for student loans can often be confusing. 

So, let's take a quick look at the two categories of loans.

The first loan student has a choice of are federal loans...

• Typically based on your INCOME
• Payments can be as low as $0 each month
• Many are 'subsidized'- The government pays the interest
• Some of the balance may be forgiven at the end of the loan term
• There is a limit on the total you can borrow
  

While there are a variety of federal loans and repayment plans associated with them, the most popular repayment options, right now, are based on your income.

This means if your loan student can't find a job, their payments could be as low as zero each month. 

BUT KEEP IN MIND, WHILE FEDERAL LOANS MAY BE PREFERABLE, THERE IS A LIMIT TO THE AMOUNT YOU CAN BORROW EACH YEAR.
THESE LOANS WERE NEVER INTENDED TO COVER THE ENTIRE COST OF COLLEGE.

That brings me to private loans... 

• Payments are based on INTEREST RATES
• Interest begins accruing immediately!
• Payments may begin while your child is still in school
• There probably isn't a limit (student with a co-signer)
• Must make payments even if you cannot find a job!

The higher the cost of the school, the greater the percentage of private loan student will have. The payment terms will vary, but they're typically based on a fixed interest.

But unlike federal loans, if the student can't find a good job, they must still make their payments. If that's not possible, THE CO-SIGNER will be forced to make them.

That is why identifying the total cost of your school is so important. 99% of graduates this year stated they had no idea how they were going to repay their loans, nor did they know these basic differences between federal and private loans.

Being more informed now will motivate you and your student to keep costs down and borrow less as you make the college selection together.

One more point on federal loans...

MOST STUDENTS AND PARENTS ARE UNAWARE THAT THE TIME PERIOD FOR SUBSIDIZED STUDENT LOANS, THE LENGTH OF TIME THE GOVERNMENT PAYS YOUR INTEREST, DOESN'T LAST FOREVER.

Which means the clock is ticking. Switching majors, taking too long to graduate, et cetera, can trigger thousands of dollars of interest on top of the loan student has borrowed. Which is why every decision you make about college is so vitally important today.

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