Sunday, 29 September 2019

Everything You Need To Know About Student Loans

Everything You Need To Know About Student Loans

44 million Americans collectively have over $1.5 trillion of student loan debt, it's an epidemic at this point, that means you need to arm yourself with all the information possible, here is everything you need to know about student loans


1. Decode Your Financial Aid Letter Properly.

The first aspect is understanding whether or not the money you are receiving is a scholarship or a loan. Sometimes using words like "Award" makes it sound like it's a scholarship. When in fact it's not, it's a regular loan. If you have any confusion about which type yours is, sure to reach out to the financial aid office at your school.


2. Federal Student Loans Are Better Than Private

Federal student loans are better than private. If you are reading this article, before you finish taking out student loans for college, then be sure to always maximize your federal student loans before turning to private. Federal student loans provide far more options in repayment than private loans to you. Some federal student loans are even subsidized which means interest does not start accruing while you are in school.


3. You Can Actually Return Surplus Loans Or Your Financial Aid Refund.

Before you commit to all of your student loans, you need to run the numbers and see if you actually do need to use every penny you received. You might think, wait, I can give money back? Yes, you can, it's within your rights as a borrower to cancel all or a portion of your federal student loans without triggering fees or accruing.

If you do it within 120 days of receiving them. You may also have received a financial aid refund, the term refund makes it sound like it's free money, kind of like a tax refund. But it's not, it's still a loan and it's still accruing interest.

If you don't need that money because all of your base needs have already been met, then it's best to just return the refund in order to have less to be paid back after you've graduated.


4. How To Find All Your Student Loans

Most people have multiple student loans with different servicers. So, it can be a real pain to track them down, federal student loans make it fairly simple with the national student loan database system which can be found at nslds.ed.gov

All of your federal student loan information should be right there, you can pull a free copy of your credit report from annualcreditreport.com in order to track down private student loans.

It also doesn't hurt to ask your parents especially if they took out some student loans for you and expect you to help them pay them back.


5. When You Have To Start Repaying

You generally don't have to start making payments on federal student loans until 6 months after you've graduated or after you've dropped below half-time enrollment. Private student loans don't always offer the same amount of time so be sure to check with each one of your providers to see how long your grace period is.


6. Let's Talk About Repayment Options

As I mentioned earlier federal student loans have far more options including the income-driven repayment plans and forgiveness programs. Income-driven repayment plans help make sure that your entire paycheck is not going towards your student loans and it can help provide a little bit of breathing room in your budget for month-to-month

These plans cap your monthly payment at 10% to 20% of your discretionary income, the issue with these plans is that you extend the term of your loan from 10 to 20 or 30 years after two decades of making payments. any remainder on the student loans gets forgiven.

Forgiveness programs are generally for people working in the public sector such as nonprofit or for the government. The public service loan forgiveness program, for example, requires you to make 10 years worth of student loan payment and at the end of that time, any remainder will get forgiven.

You usually need to consolidate your federal student loan in order to make them eligible for either an income-driven repayment plan or for forgiveness plan. Consolidation is not the same thing as refinancing.

Refinancing is the act of taking out a new loan to pay off an old loan. I know it sounds crazy but the reason you do this is that the new loan has a lower interest rate and therefore it could save you hundreds to thousands of dollars over the life of your loan.

However, there is a huge catch.

Refinancing a federal student loans turns it into a private loan which means they are no longer eligible for federal assistance, like income-driven repayment or forgiveness. 

You do not have to refinance all of your student loans, so, if you have federal and private student loans. It could make sense to refinance the private and leave the federal student loans alone.


7. There Are So Many Scams 

Be careful, there are tons of these student loans scam, you do not need to pay anyone to get you enrolled into a federal program to help pay off your student loan debts.

Don't let someone swindle you into paying them money for something that you could do for free. That money could be going towards paying off your student loans, also, your servicers might not do a great job of telling you what all your repayment options are, so it's your job to do your homework and keep on top of all the paperwork.




Hopefully, this article helps you to understand more about student loan.

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