The Basics of Student Loans

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You’ve whittled your potential college choices down to a few, which is an accomplishment right there. You’d frankly be over the moon about this time in your life, and rightly so, if it weren’t for the fact that you need help with tuition. Big time. You do know that help is available in the form of financial aid, but you’ve been putting off looking into it. It also just seems so daunting. To help you, here’s a primer: The basics of student loans.


The Issue

For many, borrowing money for college is the first major financial commitment they’ll make. And they’ll have plenty of company: some 70% of U.S. students wind up getting loans to pay for their tuition and living expenses, plus books and other supplies. After all, the cost of financing higher education has been spiraling upward for some time now. And that’s a problem for many.


What are Student Loans?

Let’s start there. These are loans that are designed to help you with college tuition, living expenses, books. and other materials.


What Kinds of Student Loans are There?

In the main, there are two kinds of student loans: federal and private. Let’s look at each:


Federal student loans. Also known as direct loans, federal student loans are funded through the Education Department but handled by a loan servicing company. Each type of federal student loan – for undergrad, grad students, and those seeking professional education – has its own requisites. Some loans are need-based; others are not.

In any case, all applicants must complete and submit the Free Application for Federal Student Aid (FAFSA). You should submit one of these even if you don’t think you’ll qualify for assistance because the fact is that most people do get something.


The three main types of federal student loans are:

  • Direct subsidized loans. These are for undergrads with financial needs. And while you’re in school and other times of deferment or grace, the government covers the interest.
  • Direct unsubsidized loans. These are not based on need and are available to undergrad and grad students.
  • Direct PLUS loans. These are for parents of undergrad students as well as for grad and professional students. They’re to cover expenses that financial aid doesn’t.


Private student loans. Such loans are available from lenders including banks, state programs, credit unions, and more. Obtaining one, which can be used however you want, by the way, hinges on your credit portfolio and earnings. If you can’t get one on your own, you can try to find a cosigner to help.


Another good thing about such loans is that you can always do a student loan refinance later of your higher-interest loans, which can save you cash. What is refinancing? It’s when you take out a new, lower-interest loan to cover existing loans. It’s a popular strategy.


How Often Do I Apply for Federal Loans?

You’ll need to apply every year you’re in school in case your situation has changed. However, after the first one, you won’t be required to fill out the whole danged thing; basic info that doesn’t change – your birthdate, for example – needn’t be resubmitted.


Now that you know the basics of student loans, you can stop putting off your search and commence finding the funding for your all-important education. You do need to start your search as soon as possible. And remember, if you need a private loan, or refinancing down the line, we’ve found that the servicer Juno can get you the best interest rate and repayment flexibility.

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