The more expensive college tuition has increased student debts. Paying $7,000 per year at a state college or $26,000 at a private college may just be too much for regular students and their families. According to the New America Foundation, students who are aiming for a bachelor’s degree have to borrow around $21,900 (based on 2003-2004 data at 2012 dollars). This should be repaid in more than 10 years, starting six months after graduation, and for $233 per month. But in 2011 to 2012, this student debt increased to $29,384 with a monthly payment of $312.
What’s even more unfortunate is that student debts from government-issued loans or private loans cannot be waived during bankruptcy, unlike mortgage debt or credit card debt. Those who owed thousands of dollars in student loans still have to pay them off, whatever the condition of the economy will be.
For students who still wish to pursue a college degree despite the risks of being buried in debt, it might help to learn more about the different kinds of student loans. They can be broadly categorized into private and federal loans. Private student loans are provided by lending agencies, complete with interest rates, credit requirements, and repayment schedules arranged by lenders. On the other hand, federal loans follow uniform rates and requirements. The most popular loans of this kind are Perkins Loans, Stafford Loans, and PLUS Loans.
There are Direct Subsidized Loans for undergraduate students that need financial aid. The amount that students can loan is determined by the college and it will likely be enough for how much money the student needs. The interest on these loans is paid for by the US Department of Education.
Students may also take out Direct Unsubsidized Loans. These are available to both undergraduate and graduate students. They don’t need to show proof of financial need and the amount of the loan is determined by the cost of attendance and other financial support that students may receive. The interest is paid for by the students. Unpaid interest will accumulate and will add to the loan’s principal amount.
Direct PLUS Loans are awarded to students by the US Department of Education. They are only available to students with a good credit history. The amount of this loan is also determined by the cost of attendance, minus the other financial assistance to be received by the student.
Federal Perkins Loans are up for grabs for undergraduate, graduate, and professional students. However, these are only provided to students with exceptional financial need by the school. Not all schools participate in this loan program, though, and they come with a 5% interest rate.
Students may also take out Private Student Loans. These are provided by private lenders, who have different credit requirements, repayment schedules, and interest rates. They might be available online, through the university’s financial aid office, or the lenders themselves.
It is important to remember, though, that student loans must be paid, regardless of whether the students graduated or not. They should carefully consider taking out a loan or not because repayment of these loans can establish a strong credit history and the start of a positive financial future ahead of them.
Student Loans Struggle by John Smith MD