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How do student loans work and how do I choose the best one?

This never seems to come up in college discussions and I'm a bit lost in the process.

#student #studentloans #money #loans #finance #financial-aid #student-loans #college

Hi Mikala! I think you'll find some good info here: https://www.careervillage.org/questions/66508/how-will-i-pay-for-college Abby Lupi

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John’s Answer

Student loans are usually government backed loans, like Sallie Mae, that provide a means for students to borrow money to complete their college education. There are several companies that offer these types of loans at both variable and fixed interest rates. There is a large range in the loan amounts you can apply for. Somethings to be wary of include, the interest rate, generally best avenue is a fixed rate which will have a fixed payment over the life of the loan vs a variable rate where your payment will fluctuate up or down depending on your current interest rate which is usually tied to the prime rate. Calculate the amount of money you will need for the first year (these are applied for annually) and deduct what you plan on paying yourself (maybe books) and make sure you consider all aspects of your learning that you may need assistance with. Be frugal with this money and make SURE that you only spend this money on your college tuition, books, room and board if needed. DO NOT spend this money on non college related expenses. Stay focused on your course and consider any errors you may have made in the first year when applying for your 2nd year student loan.

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Sharyn’s Answer

Typically the schools Financial Aid package will incl loans. Note - it is best to receive grants, scholarships that don't have to be paid back. Some schools package loans as part of the aid package but this is money you will have to pay back .

The best are Federal Subsidized loans - Subsidized means the government is paying the interest while you are in school. This saves you money. Its a gift from the government.

Federal Unsubsidized loans are federal loans but interest accrues while you are in school.

If your aid package includes Private Loans it is a strong indicator that it is a school you can not comfortably afford.

Parent Plus loans are Federal loans offered to parents if there is still unmet need. This is a loan your parent would take out on your behalf. They are responsible for repayment.

Also you don't usually get to "choose" the loan unless you get a private loan. There are many providers for private student loans. Their rates are higher and the repayment terms stricter.

Note - These are loans that you will be responsible for. They cannot be discharged in bankruptcy. Be careful that you only get what you can comfortably repay based on what career you are considering. Get an idea of what salaries your chosen field pays.

Sharyn recommends the following next steps:

Look up a loan repayment calculator. you will most likely be paying this money back for the next 10-20 years.