Potential Magazine College Organizer 2019 | Page 46

pay the way
DO YOUR
RESEARCH!
government vs. private loans
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 do not begin until you graduate, leave school, or
change enrollment from fulltime to part-time. May require payments while you are still in school.
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.
Most undergraduate students qualify for a subsidized loan,
where the government will pay the interest while you are
enrolled at least a half-time basis. Private student loans are not subsidized. No one pays the
interest on your loan but you.
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.
No cosigner needed. May need a cosigner.
Interest may be tax deductible. Interest may not be tax deductible.
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.
Repayment plans, including an option to make payments
based off your monthly income, are available. Check with lender about repayment options first.
No prepayment penalty fee. May have prepayment penalty fees.
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
program.
Difficult or impossible to discharge with bankruptcy May be possible to have debt discharged with bankruptcy
In the long run, there are more benefits to taking out a
Federal Student Loan when it comes to repayment. You do
not have to worry about paying it back as soon as you take
out the loan, and there are usually great repayment plan
options.
46 | College Organizer 2019
Be sure to carefully consider all the information before
deciding what kind of loan to take out.
And remember: Never take out more loans than you
need, because you have to pay them back in the end!
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