Are you ready for college? We’re here to help. We understand how scary and overwhelming it can be when a student decides whether or not to borrow money for school. That’s why we have put together this guide with everything you need to know about student loans, including looking at your current repayment options, understanding the different types of loans available, and what they mean for your future earning potential.
With student loan debt levels rising, graduates need to know how their loans will affect them after graduation.
Student loans are a significant investment that will pay off in the long run. However, the amount you borrow and the length of time it takes to repay your loans depends on several factors:
- Your income and expenses
- How much time it takes to earn enough money to pay off your student loan balance (you can choose monthly student loan payments or yearly)
First, it is crucial to understand the difference between federal and private student loans.
Federal student loans are made by the Department of Education, which offers subsidized and unsubsidized loans (the latter being more expensive).
Private lenders also offer subsidized loans and other types of debt they sell on their websites and apps.
Private student loan organization lenders often charge higher interest rates than federal ones because they don’t have access to government subsidies like you do; however, there may be times when you can negotiate better terms with them if your credit history is strong enough or if you’re willing to pay more upfront to avoid paying interest over time.
Types of Direct Loan
Two types of Direct Loans are issued to undergraduate students: subsidized and unsubsidized.
Subsidized loans are for undergraduate students only, who deserve financial needs.
Unsubsidized Direct Loans are also available to graduate and professional students as well as parents of dependent undergraduate students who meet specific credit requirements; they are student loan assets backed with securities. Unsubsidized loans are approved regardless of financial need; it is one of the student loan benefits that anyone can get this loan. However, these loans may be more expensive than those with a subsidized interest rate.
If you are a graduate or professional student, you can easily get a loan for education by applying directly to the federal government and receiving unsubsidized direct loans. These loans have no interest while you are in school, but after graduation, they will add interest until paid off within ten years of repayment because that is when student loan repayment starts.
If you have been approved for an unsubsidized direct loan but don’t meet the credit requirements yet—for example:
- You haven’t had any credit history since turning 18 years old; or
- Your total monthly debts exceed 400% FICO® Score; or
- If your total monthly debts exceed $2,500, then you’ll need to fill out an application and get your parents’ co-signer information filled out. In this case, you can get student loan assistance from a private or government financial official.
You can also take out a Direct Loan if you have one or more federal student loans. In addition, there are three types of Direct Loans issued to graduate and professional students — unsubsidized, PLUS, and Consolidation loans.
Unsubsidized loans have interest that accrues while you are in school and during grace periods. But how are student loan payments calculated? They may be repaid in monthly installments with little or no interest during this period (up to 120 days). However, after 120 days have passed since graduation or the end of your grace period (whichever comes first), all remaining unpaid principal and interest will become due immediately at what’s called “maturity”—that is when the total amount owed becomes due regardless of whether it’s paid earlier than expected by making additional payments before maturity occurs.
Since the average student loan debt is around $37,400, the loan payments are based on the size of your debt, your interest rate, and your repayment plan.
Difference between student loans and scholarship
If you’re wondering how is a student loan different from a scholarship, then you must know that once you borrow a loan from a government or private company, you have to pay it back with interest. However, scholarship money is yours to keep, and you don’t have to repay it.
Hopefully, this blog answered your question about how do you apply for a student loan and many other questions related to student loans.