What You Need to Know About Student Loans

Planning for college is a taxing (haha) experience for any student and their family. Not only are you frantically planning to make sure your student knows how to fold laundry and buy groceries without you, but you also have payments to start making! Whether your student is putting themselves through school or receiving help from you it’s important that you and your student are aware of the types of student loans out there and what each one entails.

• There are two types of student loans.
  • Federal Student Loans (FSL):
    • Issued directly by the federal government
  • Private Student Loans:
    • Issued by banks or other financial institutions
• There is a difference between FSL subsidized and FSL unsubsidized.
• Subsidized:
  • These FSL’s DO NOT accrue interest while the student is in school
• Unsubsidized:
  • These FSL’s DO accrue interest while the student is in school.
• Different loans have different repayment terms.
  • Federal Student Loans:
    • The repayment terms of these loans are more flexible and often offer relief to the student if they need it.
  • Private Student Loans:
    • As far as these loans go, the private lender sets the term and may or may not offer flexibility or relief to the student when they start the repayment process.
• FSL’s are based solely on the student’s financial need.
  • NOT on the borrowers credit rating and NOT whether the borrower is the student, the parents, or someone else
    • The only exception is the parent PLUS loan.
  • Financial Need = (Cost of Attending) – (Student’s Expected Family Contribution)

It is also important that you and your student have an educated plan about how they will pay back these student loans. Here are a few points to remember when it comes to keeping interest under control and little things to recall about loans.

• Federal Student Loans typically have lower interest rates in comparison to Private Student Loans
• Students should consider paying the interest that accrues on an unsubsidized loan while in school to minimize their debt.
• Students! You do not need to borrow all of the money available to you. Try to only borrow what you need for tuition, books, and fees, and then try to pay for living expenses through income made over the summer and/or during the year.
• If you are taking out a Private Student Loan make sure you know all the details. Question the lender and read the terms VERY carefully.
• Plan your loan backwards. In other words think about what your future income will have to be to pay back this loan and how long it will take you.

College is stressful. Make sure you keep your finances and loans in order to lessen the amount of stress felt during the next four years, and don’t forget to tell your student “Have Fun!”

source:

http://www.journalofaccountancy.com/issues/2017/jan/student-loan-repayment.html#sthash.8wh7stEE.dpuf