pay the way student loans
FEDERAL LOANS
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 :
Federal : Payments do not begin until you graduate , leave school , or change enrollment from full-time to part-time .
Private : May require payments while you are still in school .
F : Interest rate is fixed , oftentimes lower than private loans and even lower than most credit cards .
P : Variable interest rates , some greater than 18 %. A variable rate may substantially increase the total amount you repay .
F : Most undergraduate students qualify for a subsidized loan , where the government will pay the interest while you are enrolled at least on a half-time basis .
P : Private student loans are not subsidized . No one pays the interest on your loan but you .
F : Credit check not required for Stafford or Perkins Federal Student Loans .
P : May require an established credit record . The cost of your private loan will depend on your credit score and other factors .
F : No cosigner needed . P : May need a cosigner .
F : Interest may be tax deductible . P : Interest may not be tax deductible .
F : If you are having trouble repaying your loans , you may be able to temporarily postpone or lower your payments .
P : Private student loans may not offer a repayment plan based on income .
F : Repayment plans , including an option to make payments based on your monthly income , are available .
P : Check with the lender about repayment options first .
F : No prepayment penalty fee . P : May have prepayment penalty fees .
F : If you work in public service , you might be able to have a portion of your loans forgiven .
P : It is unlikely that your lender will offer a loan forgiveness program .
F : Difficult or impossible to discharge with bankruptcy .
P : 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 . 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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