| your money... |
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...your future. |
Loans and Borrowing
Student Loans
Attending college is expensive. Chances are you, like 60%
of all college students, will need to take out a loan at some
point to help cover the many costs associated with pursuing a
higher education. Though it may seem daunting and
overwhelming, taking on student loans is something that you can
handle, and as long as you are smart and responsible you can
graduate with a manageable debt that you will pay off.
Student loans tend to have unique terms that would be hard to
find outside of from a federal source. With low interest
rates, flexible repayment options, potential periods of paid
interest, and grace periods before repayment begins, student
loans are designed to help young adults enter the work force
with manageable debt.
There are many different student loan types, and with each loan
comes different factors that you as a student will need to
consider. But there is one thing that you need to know
before taking out any student loan and that is
THEY
WILL BE WITH YOU UNTIL THEY ARE PAID OFF COMPLETLEY.
This means that you cannot default on the loan, stop making
payments, or even receive a break through bankruptcy.
Every dollar you borrow will be paid back, and it will be paid
back with interest.
Now that you understand the importance of taking out a student
loan, lets look at some common terms that you are going to want
to know when choosing what loans work for you.
Loan Types
An unsubsidized loan means that when you take out the loan, interest begins accumulating while you are attending. Though you aren't required to make payments until after the grace period, during your time in school the loan can literally add thousands to the principle that you will have to repay.
Subsidized Loans
A subsidized loan still technically accrues this interest while you are attending school, the difference is that the government pays those interest payments while you attend school so when you graduate you only have the original principle you took out. That paid interest is free money to you, and means you will owe less when you do begin the repayment plan.
Stafford Loans
These loans are sponsored by or directly through the government. As of June 1st, 2012 all Stafford loans have a fixed interest rate of 6.8% and a 10-year repayment plan. You are not required to begin paying back the money you borrowed until 6 months after graduation or dropping below full-time status. The amount you can borrow increases each year from $3,500 to $5,500. Beyond this, Stafford loans can either be Subsidized or Unsubsidized.
Perkins Loans
Perkins loans are also federally sponsored, and are considered the best loan option for those that qualify. these loans are also subsidized, and can be awarded for up to $5,500 each year. These loans have a fixed 5% interest rate, and have a 9-month grace period after graduation.
PLUS Student Loans
These are loans that parents can take out, and are taken out regardless of need of the family. These are also government sponsored, and are supposed to be used for costs outside of tuition that a student will come across. They have a fixed 7.9% interest rate. Repayment begins 60 days after the money is disbursed, but in certain situations can be deferred up to 6 months after graduation.
Private Loans
Private loans are the only one on this list not sponsored through the government, and are instead taken out through any one of the financial institutions that one might normally take a loan out through. The interest rates on private loans tend to be higher than the other options, and is dependent on you and your parents credit score and which institution you receive the loan from. These loans typically have shorter repayment plans and either much smaller, or no grace periods at all.
Repayment
Once you've graduated and begun repayment on your loans, you are
entering a new stage of your life. Payments are due on
your loan every month, and though you can sometimes talk with
your lender during tough times to put off payments, for the most
part that payment is stuck with you until it's all gone.
If you take out the UW La Crosse average of $25,000 and have a
standard repayment schedule of 10-years, you are looking at a
$276 payment every month for 120 months!
While this may seem impossible, you can do it if you practice
smart financial habits and understand the consequences of
falling behind on your payments. Though the Standard
10-year repayment plan is most common (hence the "Standard"),
there are many options for students to choose that best fits
their lifestyle and career choice when leaving school.
| Repayment Plan | Monthly Payment and Time Frame | Comparison |
|---|---|---|
| Standard Repayment Plan | Payments are a fixed amount of at least $50 per month Up to 10 years |
You'll pay less interest over the life of your loan under this plan, but will likely pay the most per month |
| Graduated Repayment Plan | Payments are lower at first and the gradually increase, typically every two years Up to 10 years |
You'll pay more for your loan in total compared to the standard 10-year, but will have an easier time making payments when the loan is first taken out |
| Extended Repayment Plan | Payments may be fixed or graduated 12-25 years |
You'll have smaller monthly payments, but in the end
will pay much more in interest You are only eligible for this repayment plan if you have $30,000 or more of outstanding loans |
