Potential Magazine College and Career Organizer 2020 | Page 44

pay the way
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loan comparison
DO YOUR
RESEARCH!
If you’re like most full-time students, you may need to consider
a student loan to help pay for college. But should you take out a
Federal Student Loan, or should you consider a private lender?
Here are the points to consider before you decide:
VS
Federal Student Loans
Private Student Loans
Payments
Payments do not begin until six months after you graduate, leave
school, or change enrollment from full time to part-time.
May require payments while you are still in school.
Limit
Most private student loans have undergrad loan limits of $75,000
to $120,000.
Federal Student Loans have a limit of up to $12,500 a year.
Summers
Only pays for 8 semesters. If you don’t max out your 8 semesters,
you can use your loan towards summer courses.
Will pay for summers. The loan limit usually has an annual
amount equal to the cost of attendance minus other financial aid.
Interest
Interest rate is fixed, often times lower than private loans and even
lower than most credit cards.
Variable interest rates, some greater than 18%. A variable rate
may substantially increase the total amount you repay.
Subsidized
Most undergraduates qualify for a subsidized loan, where the gov-
ernment will pay the interest if you are enrolled at least half-time.
Private student loans are not subsidized. No one but you pays the
interest on your loan.
Credit
Credit check not required for Stafford or Perkins Federal Student
Loans.
May require an established credit record. The cost of your private
loan will depend on your credit score and other factors.
Cosigner
May need a cosigner. The interest rate is significantly higher
without a cosigner.
No cosigner needed.
Deductible
Interest may be tax deductible.
Interest may not be tax deductible.
Postpone
If you are having trouble repaying your loans, you may be able to
temporarily postpone or lower your payments.
Private student loans may not offer a repayment plan based on
income.
Monthly Payments
Repayment plans, including an option to make payments based off
your monthly income, are available.
Check with lender about repayment options first.
Fees
No prepayment penalty fee.
May have prepayment penalty fees.
Forgiveness
If you work in public service, you might be able to have a portion
of your loans forgiven.
It is unlikely that your lender will offer a loan forgiveness pro-
gram.
Bankruptcy
Difficult or impossible to discharge with bankruptcy.
44 | College Organizer 2020
May be possible to have debt discharged with bankruptcy.
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