pay the way
student loans
College Loan Breakdown
What is a Student Loan?
A student loan is money that you borrow to help pay for school
with the expectation that you will pay that money back in the
future. Student loans don’t differ all that much from any other
type of loan. However, the process of obtaining and repaying a
student loan has some unique attributes.
How to Get Started:
Students usually won’t have to begin making their
6 months
after graduation.
omplete the FAFSA. It can qualify you for federal
C
loans, which usually have the best terms.
ontact your college’s financial aid office to ask about
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loans through your college.
Check
with the U.S. Department of Education to find
out about state loans.
How Do Student Loans Work?
Your student loan might be the first loan you’ve ever received, so
keep in mind that it’s not just how much you borrow—it’s how
much that amount costs in the long term.
The interest rate—the cost of taking out your loan—directly
affects the long-term cost of a loan. The amount of interest is cal-
culated as a percentage of the amount you borrow and added to
your overall owed cost. Depending on the type of loan, interest
either accrues from the time you take out the loan until you have
completed the repayment plan, or begins accruing six months
after you graduate.
How Much Will I Owe Each Month?
This amount will differ for each student based on the amount
they borrow and their interest rate. The minimum monthly
payment will be a combination of a percentage of each individual
loan amount all combined into one monthly sum.
$25,000 loan $75,000 loan
= $150-200/month = $450-580/month
(Used car payment) (Apartment rent)
$50,000 loan $100,000 loan
= $300-390/month = $600-775/month
(New car payment) (House payment)
Don't Borrow More Than You Need!
Who Provides Loans?
There are three main sources of student loans:
1. T he federal government lends almost half of the amount of
borrowed money annually.
You don't have to borrow the entire loan amount you are offered
in an award letter. No matter how good the terms of a loan are,
anything you borrow now will have to be repaid, plus interest.
Loan Lingo Defined:
2. State agencies offer college loans.
3. P
rivate organizations like banks, other financial institu-
tions, foundations and colleges may offer loans to students.
There are limits for the amount of federal loans and some stu-
dents might need more assistance to cover the full cost of college
and be required to seek out a private or PLUS loan (which is a
loan available to the parents of an undergraduate).
| Summer 2020
Repayment terms on student loans vary based on the type of
loan. Federal student loans are often designed to be paid off
within 10 years, whereas private student loans might differ based
on the lender’s terms.
federal student loan payments until
To get the best loans, follow these steps in order:
36
When Do I Start Paying Back My Loan?
nsubsidized: A student loan in which the interest starts
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accruing the moment you or your school receive the loan funds.
Subsidized: A student loan that does not accrue interest
while you are in school.
D
irect PLUS loans: A Federal Loan that is available for
graduate students and parents of dependent undergraduate
students—these have a fixed interest rate and are not subsidized.
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