Student Loans should be your last option when it comes to financing your education. They can lead to incredible debt and problems you don’t want down the road when you are trying to start out on a career. There are two basic types of loans, Federal and Private. Federal loans are subject to regulation by the federal government and include various protections. Private loans, which are often referred to as “alternative loans” do not include the same benefits or protections guaranteed by federal loans. It is essential should you chose to explore private loans that you are aware of deceptive claims or practices which they will attempt to use to get your business.
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Private Loans
Should you be considering Student Loans, it is not recommended to start with Private Loans. Many private loans usually have higher fees, and interest rates which are greater than federal government loans. Many private loans will also not offer the ability to cancel loans, or loan forgiveness which are available through federal loans.
Spotting Scams and Deceptive Practices
It is highly essential when considering a private loan that you know with whom you are dealing with and all of the terms of the loan. The Federal Trade Commission and the Department of Education offer the following tips to spot possible scams and deceptive practices:
- Appearance: Private lenders and marketers will try to use names, seals, or logos in order to attempt to simulate those of a government agency. They will attempt to make it seem like they are affiliated with government student loan programs. The Department of Education does not send advertisements in the mail nor do they solicit consumers, so if you receive mail offers, it is probably not a government agency.
- Incentives: We all love incentives to do new things but don’t be tempted by offers such as gift cards, credit cards, or sweepstakes prizes. Don’t let them distract you from determining whether the terms of the actual loan are agreeable.
- Personal Information: NEVER give your personal information through phone, email, or online unless you know exactly who you are dealing with. Many private lenders will ask for you student ID number, occasionally you Social Security Number, and Personal Identification Number on the basis of determining your eligibility. You should only share information such as this if you know and trust the private company.
- Track Record: If you are considering dealing with a private student loan agency you should investigate their track record through your state Attorney General and local consumer protection agency.
Available Federal Student Loans
Federal Student Loan information is subject to change from year to year:
- Direct Subsidized Loans: student loans available to undergraduate candidates who need financial aid. To receive this loan, you must demonstrate a need for financial help to cover the costs of higher education.
- Direct Unsubsidized Loans: student loans made available to undergraduate, graduate and professional students. The difference between this loan and the previous one is that students do not need to demonstrate whether they are in financial need of the loan.
- Direct PLUS Loans: student loans made to graduate students, professional students, and undergraduate students who are still considered dependents on their parents.
- Direct Consolidation Loans: These loans allow you to combine all of the student loans you are eligible for into a single loan under a single loan servicer.
- Federal Perkins Loans: A student loan program in which the school is the lender of money. It is for undergraduate and graduate students at the school who are in financial need. The specifications of these loans depend on the school from which you are getting the loan.
Before you Borrow...
Federal Student Loan programs will describe education as an investment in your future, which it is, but student loans may not be the best way to finance that future. Student loans should only be taken out as a last resort and all Grant and Scholarship options are exhausted.
Be a responsible borrower!!!!
Be a responsible borrower!!!!
- Keep an accurate track of how much money you are borrowing. You will need to repay your loans after you graduate so make sure you know how much you can pay without being stuck in debt. A good rule of thumb to go buy is only purchasing a small percentage of the starting salary so you can ensure that you can pay back the loan.
- Use the US Department of Labor’s Occupational Outlook Handbook which contains an estimate of salaries for varying careers and employments. It can be an incredibly useful tool when trying to determine the amount of your salary depending on the location you wish to live. If you are unsure of the career you wish to go into, you can also use the Department of Labor’s tool for career searching.
- Keep accurate filing of important documents. Keep copies of all your loan documents and be well educated on the terms and conditions of your loans. When you sign up for a loan, you sign a promissory note meaning you are agreeing to repay the loan according to the terms and conditions of said loan. You need to repay the loan regardless of whether or not you complete your education, or get a job upon completion of your college program.
- On. Time. Payments. Just like with a credit card, it is essential that you make all of your payments on time. They must be made regardless of whether or not you receive a bill, notice, or reminder. Partial payments do not qualify as fulfilling your obligations to repay your loans.
- Maintain contact with the company servicing your loan. You should contact your loan provider when you do any of the following: graduate, withdraw from school, drop below being a half-time student, transfer to another school, or change your name, address, and Social Security Number. You should also contact them should you face any problems paying back your loans.
So...how much money can I borrow?
Undergraduate Students:
Graduate Students:
- Perkins Loans: You can borrow a maximum of $5,500 per year depending on financial need, aid you have already received, and the availability of funds from your college or career school.
- Direct Subsidized and Unsubsidized Loans: Students can borrow between $5,500 to $12,500 per year. Your college year is also dependent on how much you can receive.
Graduate Students:
- Perkins Loans: You can borrow a maximum of $8,000 per year also dependent on your financial need, aid you have already received, and the availability of funds from your college or career school.
- Direct Unsubsidized Loans: Maximum of $20,500 per year.
Student Loan Debt
Student Loan debt is a very serious problem which prevents many recent graduates from attaining a secure financial foothold to start a career. Sometimes scholarships and grants don’t quite cut it and you do need to borrow, it happens. What’s most important is to be a responsible borrower and never borrow more than you can pay back. For more information on Federal Student Aid, go look at their website. The information here should get you started but in order to be well informed, you should conduct further research on your own for your specific needs. For more information on student loan debt, check out these testimonials from other students. Learn from their errors and do your best to avoid them.
www.pbs.org/newshour/spc/multimedia/student-loans/#.WMWc8fnyu03
www.pbs.org/newshour/spc/multimedia/student-loans/#.WMWc8fnyu03