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Student loans

Student loans can be very helpful when paying for college. They can make up the difference in affording that last piece of the tuition bill. On the other hand, what most people don’t consider at the time is that those student loans must be repaid.

Loans are borrowed money that require repayment with added interest. So you can pretty much guarantee you’ll pay back more than what you originally borrowed.

Consider this important tip when dealing with students loans: Only borrow as much as you need.

Students are not required to accept the entirety of a loan offer. For instance, if your student receives a financial aid package that includes a $5,000 loan offer but you only need $1,500 to cover remaining expenses, consider only accepting the $1,500. This will cover immediate expenses without accumulating unnecessary debt to repay.

Quick Facts about Federal Student Loans

  • You must submit the Free Application for Federal Student Aid (FAFSA) to be considered for a federal student loan.
  • There are multiple types of federal student loans available. The most common is known as a Federal Direct Loan, through which the U.S. Department of Education is the lender.
  • There are four types of Direct Loans, defined by the office for Federal Student Aid as follows:
    • Direct Subsidized Loans are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school.
    • Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate and professional students, but in this case, the student does not have to demonstrate financial need to be eligible for the loan.
    • Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid.
    • Direct Consolidation Loans allow you to combine all of your eligible federal student loans into a single loan with a single loan service.
  • The biggest advantage to Direct Subsidized Loans is that the U.S. Department of Education pays the interest on the loan until repayment terms begin. For the remaining loans, you are responsible for paying the interest that begins to accrue the day of loan disbursement.
  • The Federal Perkins Loan Program is another federal student loan, through which the school is the lender. Perkins loans are available to undergraduate and graduate students demonstrating exceptional financial need.
  • All student loans accrue interest on a daily basis. A payment made on a student loan directly applies to an outstanding interest balance before any of the payment is applied to the outstanding principal balance (the amount owed before interest).
  • Federal student loans often offer lower interest rates than private loans from banks or other sources.
  • Typically, federal student loans become due after a designated grace period once a student leaves college or drops below half-time enrollment. Direct PLUS Loans require repayment once the loan is completely disbursed.
  • You can choose from several different loan repayment plans to accommodate your financial situation. Extending repayment will likely increase the amount of interest paid on a particular loan. Learn more about repayment plans.


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