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$ For College

Student loans are real loans—just as real as car loans or mortgages. You have to pay back your student loans. But, the truth is, many students need to borrow money to pay for their education. The most important thing you can do is understand how loans work before you sign the loan paper work, otherwise you may be in for an unpleasant surprise down the road.

When you fill out your FAFSA and apply for financial aid at your college or career school, the school’s financial aid office may offer you loans as a part of your financial aid package.

Generally, there are two types of student loans:

Federal student loans: These loans are funded by the federal government.

Private student loans: These loans are nonfederal loans, made by a lender such as a bank, credit union, state agency, or a school.

 If you need to borrow money to pay for college or career school, a federal student loan is probably your best option.

The three types of federal student loans are:

  • Direct Subsidized Loans and Direct Unsubsidized Loans;
  • Direct PLUS Loans (for graduate and professional students or parents)
  • Federal Perkins Loans.

What are the differences between federal and private student loans?

Federal student loans include many benefits like fixed interest rates and income-based repayment plans not typically offered with private loans. In contrast, private loans are generally more expensive than federal student loans.

The US Department of Education has a website that explains all of the ins and outs of financial aid. Visit www.studentaid.ed.gov for comprehensive, reliable information on all of your loan and other financial aid options.

Loan Repayment

No matter which type of loan you receive, remember that after you graduate, leave school, or drop below half-time enrollment, your loans must be repaid. However, you have a period of time before you have to begin repayment. This is called a “grace period” and it ranges from six to nine months, depending on the type of loan.

When you graduate or leave school, you’ll receive information about repayment, and your lender will notify you of the date loan repayment begins. It is extremely important that you make your full loan payment on time either monthly (which is usually when you’ll pay) or according to your repayment schedule. 

Did you know there are some programs that will help with loan repayment?

AmeriCorps is a national network of programs that engages more than 70,000 Americans each year in intensive service to meet critical needs in communities throughout the nation. AmeriCorps offers several ways to get involved, from part-time local service programs to full-time residential programs. Members receive guidance and training so they can make a contribution that suits their talents, interests, and availability. Serve for 12 months and receive up to $7,400 in stipends plus $4,725 to be used towards your loan or future education costs.

The PeaceCorps is a federal agency that provides volunteers to foreign countries.  Peace Corps Volunteers work in the following areas: education, youth outreach, and community development; business development; agriculture and environment; health and HIV/AIDS; and information technology. Within these areas, the specific duties and responsibilities of each volunteer can vary widely. Volunteers may apply for deferment of and partial cancellation of certain types of student loans. 

There are other state and federal programs that help you repay your student loans after college if you agree to meet certain conditions, like teaching in a school district without enough qualified teachers, or becoming a nurse or doctor in an area without adequate medical services. Information on many of these programs can be found at www.fedmoney.org.