Very few students can afford to pay for their entire college education without some kind of financing. According to the National Center for Education Statistics, two-thirds of 4-year undergraduate students earning a Bachelor’s degree in 2007-2008 had at least some student loans. Their average student loan debt? Over $23,000. Those statistics don’t even take students who leave college without graduating into consideration. If you’re part of the majority and have your own student loans, it’s important to know which types of loans you have.
The Stafford loan is the main type of federal student loan. Stafford loans are available in two types. Federal Family Education Loan Program (FFELP) loans are provided by private lenders but guaranteed by the federal government. Federal Direct Student Loan Program (FDSLP) loans are often called direct loans. They are provided directly by the federal government.
Stafford loans are either subsidized or unsubsidized. If a loan is subsidized, the government pays the interest while you’re still in school. If a loan is unsubsidized, you are responsible for paying all of the interest, but you can defer the interest payments until you graduate or leave school. Subsidized Stafford loans are awarded to students that demonstrate the financial need, and unsubsidized Stafford loans are available to students regardless of their family’s income status.
If you are a dependent student, your parents might be able to take out loans to assist you with college. A federal program called the Parent Loan for Undergraduate Students, usually called Parent PLUS for short, gives parents the ability to take out loans to cover their student’s college costs that aren’t already covered by the student’s own financial aid and loans. PLUS loans are similar to Stafford loans in that they are also provided by private lenders or directly from the federal government.
Parents may be willing to help their children at any cost, but they need to keep in mind that they are personally responsible for PLUS loans and their repayment. It doesn’t matter if their child promises to make the PLUS loan payments after earning a degree – if for some reason, their child doesn’t make those payments after all, the parent is completely responsible because the loan was taken out in their name.
If you still need extra money for college, you can see if you are eligible for private loans, which come directly from various lending institutions and have nothing to do with the federal government. Private loans depend on your financial history and credit score. They also have higher interest rates than federal loans and often have variable interest rates.
Many students sign off on their loans every year without really thinking much about what they’re doing. They assume that after graduation, they’ll have a “real job” which will give them the ability to make their loan payments. I have a casual friend from college that is currently pursuing her doctorate because she is so far in debt, she’s afraid of finishing school and beginning her repayment. I’m not sure what her plans are after that eventually happens, but I’m sure she’s not the only person doing something like that.
Most student loans typically begin repayment status six months after graduation or six months after leaving school, but this can vary. Don’t make the mistake of assuming that you only have to repay loans if you graduate. That’s not the case. Your loan repayment may begin sooner than you think if start taking a lighter course load, too.
You may want to look into loan consolidation, which would combine your student loans into one large loan and only require one payment. Many people decide to consolidate loans in order to lower their loan payment, but keep in mind that this causes you to ultimately owe a lot more money because your repayment terms are stretched out for a longer period of time. Various companies specialize in student loan consolidation, and you should be able to find information online or from your school’s financial aid office.
If you wind up unable to make your student loan payments, you should look into deferment or forbearance programs which might excuse you from making the required payments for a specific period of time because of unemployment or other economic strains. For some information on possibly deferring loans, visit StudentAid.ed.gov
Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.
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