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What are the best loans to take out?

The scholarships I have are extremely helpful but they won't pay for the full tuition cost. I'm an extremely low-income student so I already know I'm eligible for many student loans. Which loans have the best qualities and which loans should be my absolutely last option? #student-loans #college #loans #money

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Ken’s Answer

The problem with loans, is that they have to be paid back. This puts an enormous strain on new graduates, which you might want to avoid. Too many people spend too much money on an education and end up with unnecessarily high debt.

It really does not matter what school you attend, as the most important factors are how well you do with the school work, which is an indication to an employer about what kind of employee you will be, and the effort that you put forth in your networking to set up networking connections that will help you throughout your education/career journey. Here is an important video for you to watch: ## http://www.ted.com/talks/julie_lythcott_haims_how_to_raise_successful_kids_without_over_parenting?utm_campaign=social&utm_medium=referral&utm_source=facebook.com&utm_content=talk&utm_term=education ##

Also, here are some good tips on how to reduce college costs, which will lessen the necessity of borrowing so much money: ##  http://www.educationplanner.org/students/paying-for-school/ways-to-pay/reduce-college-costs.shtml ##

Ken recommends the following next steps:

Getting to know yourself to better plan for education in an appropriate career area will put you on a focused course toward a career area without spending unnecessary funds. Getting to know yourself and how your personality traits relate to people involved in various career opportunities is very important in your decision making process. During my many years in Human Resources and College Recruiting, I ran across too many students who had skipped this very important step and ended up in a job situation which for which they were not well suited. Selecting a career area is like buying a pair of shoes. First you have to be properly fitted for the correct size, and then you need to try on and walk in the various shoe options to determine which is fits the best and is most comfortable for you to wear. Following are some important steps which I developed during my career which have been helpful to many .
The first step is to take an interest and aptitude test and have it interpreted by your school counselor to see if you share the personality traits necessary to enter the field. You might want to do this again upon entry into college, as the interpretation might differ slightly due to the course offering of the school. However, do not wait until entering college, as the information from the test will help to determine the courses that you take in high school. Too many students, due to poor planning, end up paying for courses in college which they could have taken for free in high school.
Next, when you have the results of the testing, talk to the person at your high school and college who tracks and works with graduates to arrange to talk to, visit, and possibly shadow people doing what you think that you might want to do, so that you can get know what they are doing and how they got there. Here are some tips: ## http://www.wikihow.com/Network ## ## https://www.themuse.com/advice/nonawkward-ways-to-start-and-end-networking-conversations ## ## https://www.themuse.com/advice/4-questions-to-ask-your-network-besides-can-you-get-me-a-job?ref=carousel-slide-1 ##
Locate and attend meetings of professional associations to which people who are doing what you think that you want to do belong, so that you can get their advice. These associations may offer or know of intern, coop, shadowing, and scholarship opportunities. These associations are the means whereby the professionals keep abreast of their career area following college and advance in their career. You can locate them by asking your school academic advisor, favorite teachers, and the reference librarian at your local library. Here are some tips: ## https://www.careeronestop.org/BusinessCenter/Toolkit/find-professional-associations.aspx?&frd=true ## ## https://www.themuse.com/advice/9-tips-for-navigating-your-first-networking-event ##
It is very important to express your appreciation to those who help you along the way to be able to continue to receive helpful information and to create important networking contacts along the way. Here are some good tips: ## https://www.themuse.com/advice/the-informational-interview-thank-you-note-smart-people-know-to-send?ref=recently-published-2 ## ## https://www.themuse.com/advice/3-tips-for-writing-a-thank-you-note-thatll-make-you-look-like-the-best-candidate-alive?bsft_eid=7e230cba-a92f-4ec7-8ca3-2f50c8fc9c3c&bsft_pid=d08b95c2-bc8f-4eae-8618-d0826841a284&utm_medium=email&utm_campaign=daily_20171020&utm_source=blueshift&utm_content=daily_20171020&bsft_clkid=edfe52ae-9e40-4d90-8e6a-e0bb76116570&bsft_uid=54658fa1-0090-41fd-b88c-20a86c513a6c&bsft_mid=214115cb-cca2-4aec-aa86-92a31d371185&bsft_pp=2 ##

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Ann’s Answer

Hi Gabriella,

This is a great question! I have been counseling students about financial aid for years, so you are in good hands. There are Federal Stafford loans that are funding by the federal government, and there are private loans that various banks will offer. There are pros and cons to both, so first I will explain how they are similar and then I will talk about what's different about each if them.

Federal Stafford Loans and Private Loans are both designed to help students fund school and can be used to assist with undergraduate and graduate degrees when a student is enrolled above part time. In other words, you must take at a certain amount of credits each semester to be eligible for them. Both types will pay in directly to the school on a term basis, (ie semester or quarter). If you borrow beyond the cost of your tuition, the leftover funds will be sent to you in a stipend. (I recommend only borrowing what you need, because student loans are expensive to pay back). You must remain enrolled above part time and meet certain academic requirements to earn the amount of the loan. In other words, your eligibility will be eliminated if you drop courses and go below part time, or you repeatedly fail the same course. The federal government also offers private loans such as Parent Plus or Grad Plus loans. They also will be deferred (you don't have to make payments) as long as you are in school above part time. Six months after you go below part time, or stop going to school you will have to make payments. If leave school and then return that clock picks up where you left off. For example, let's say you go full time the whole time for a Bachelor's degree and then take a semester off. Your 6 month grace period starts at that point. When you return the loans will go back into deferment. Once you graduate, the grace period you have will not be 6 months. It will pick up where you left off.

Here is where they are different.

Federal student loans can be both subsidized (you aren't accruing interest while in school), or unsubsidized. The amount of subsidized loans you are eligible for is based on financial need. There is an aggregate loan limit, in which you are only eligible for a maximum amount of loans in your lifetime. I believe that is $57,800 as an undergraduate student and $120,000 for a graduate degree. There is a fixed interest rate of 6.8%. (These numbers could change at anytime). You are limited to federal student loan lenders and can only consolidate your federal loans once. Consolidating your loans means clumping them into one large loan to get one payment. Also, if you don't make payments the government can take payments out of your paycheck, or even take your tax refund. You also cannot include them in a bankruptcy.

On the pros of federal loans, if you can't afford your payments there are a number of options to help reduce or pause your payments. One income based repayment plan will allow you to have your loans absolved after 25years of making on time payments. Which means the government will not require you to pay the total balance off. Also, in some cases, if you work for a nonprofit for 10 years you can have your loans absolved. The debt also can't be transferred to someone else. The amount you're eligible for also increases as you continue your degree. For a freshman you can receive $9,500. As a sophomore the amount is $10,500 and junior and seniors can receive $12,500. These numbers can also change.

For private loans, your eligibility is based on a credit check. If you have poor credit or don't have a credit history, then you will need a cosigner (someone that will be responsible for the debt if you fail to pay). The terms of the loans will differ depending on the lender. Interest rates tend to be lower, but will vary from lender to lender. You have more options with lenders, but you will have to do your homework as to what the terms of the loans are. There is no maximum limit, and if you fail to pay, the lenders are limited to the normal legal process for collecting. There also isn't a limit on how many times you consolidate. The amount you are eligible for is also based on credit. I think that sums private loans up.

I know this a lot to digest, so feel free to let me know if you have questions. Good luck!"