What are Student Loans?

Student Loans are exactly what they sound like – loans given to students to finance their education. Student Loans can be for colleges, universities, trade schools, and other vocational schools.

How do I know if I will need a student loan?

Before you try to determine if you will need a student loan, first complete the FAFSA Application. The Free Application for Federal Student Aid (FAFSA) will determine if you are eligible for financial aid (such as grants), which will lower the amount needed for a student loan, if any.

What types of Student Loans are there?

There are Federal Loans, which are broken down into two categories: Subsidized and Unsubsidized. And there are Private Loans issued by banks and other private lenders.

What is the difference between Subsidized and Unsubsidized Federal Loans?

Subsidized Loans are held with the US Department of Education and the Dept of Education will pay the interest on these loans while you are in school and up to six months after you graduate. You must prove “financial need” to qualify for these loans. Unsubsidized Loans are also held by the US Dept of Education. However, interest begins cumulating from the inception of the loan. It is generally low interest, so these loans are still attractive for students.

What if I am still considered a “Dependent” of my parents for tax reasons?

You will be able to borrow LESS as a dependent of your parents than if you were not. If your family meets certain income qualifications, you may be able to take out a PLUS loan from the US Department of Education. These loans have much higher interest rates and your parents are considered the applicants and will be saddled with the financial burden.

What are the advantages to taking out Private Student Loans?

Private loans generally offer a much simpler application process, more flexible terms, often higher lending limits, and are usually easier to manage since they are all with one institution.

What are the disadvantages to taking out Private Student Loans?

Interest rates on Private Loans are market based and may be more than those funded by the government. All of your loans would be with one institution as well, keeping you from finding lower interest rates from other institutions. Due to the fact that lending limits are often higher, it is easy to borrow too much and regret your large payments later on.

Can I include Student Loans in a Bankruptcy filing?

No. Student loans do not qualify for bankruptcy protection. There is no getting out of a student loan without payment or government intervention.

Can I refinance my Student Loans?

Yes, and it is generally recommended to investigate refinancing once you complete your education. There is potential to save thousands of dollars on interest payments.

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