When you’re new to the world of student loans, there is a lot of information to sift through to gain a clear understanding of what student loans entail. Fortunately, there are thousands of resources available across the web to help you separate fact from fiction when it comes to your student loans.
But if you’re still struggling with the basics, our student loan experts have put together this short, easy-to-follow introduction that will help guide you through the essentials. In the end, this information could end up saving you plenty of time getting acquainted with your loans, and potentially save you money in the process.
Recently, we covered the differences between federal and private loans in detail, but if you’re someone who isn’t already familiar with these two options, it may be more information than you’re ready for. Here’s a quick rundown on these two types of student loans to help you get more comfortable with the topic.
Private Student Loans: Private student loans are when a private lender (a bank or financial institution) offers you a loan for school. Usually, these types of loans offer variable rates of interest, and your approval hinges on a few important factors, including your credit score, your income, and in some cases, whether or not you have a co-signer.
Federal Student Loans: Federal student loans, on the other hand, are often much easier to obtain, and come directly from the U.S. Department of Education and its approved loan servicers. While there are several repayment programs and forgiveness programs available, the main federal student loans offered by the Department of Education include:
For many of the loans mentioned above, borrowers have an opportunity to convert loans (which are typically under 10-year standard repayment plans) into other programs that offer a variety of options. These include repayment programs and forgiveness programs that each come with their own types of benefits and requirements.
For specifics on these programs, click on the links below to see how they can benefit you.
When you’re fresh out of college and it’s time to start repaying your student loans, these repayment programs can help you lower your monthly payments and give you more time to repay your loans. Forgiveness programs, on the other hand, can eliminate a portion of your debt – and in some cases, erase your balance entirely – if you meet the qualifications for these types of programs, so they’re definitely worth looking into.
Every student loan you receive comes with some type of interest rate attached. Whether it’s a variable interest rate or a fixed interest rate, some portion of your monthly payment will go towards paying back your loan’s principal (the original amount you borrowed), while another percentage goes towards the interest that’s accruing on the loan.
To help you gain a better understanding of interest rates, our experts put together a guide that compares the two types of interest rates most student loans come with: Fixed vs. Variable Rates on Student Loans. Here you’ll find more information on the pros and cons of both types of interest rates to help you decide which is best for you.
Most people don’t give auto-pay a second thought when it comes to paying for a mortgage, vehicle or credit card purchases. With student loans, however, auto-pay doesn’t always cross a borrower’s mind, even if it makes the repayment process easier, and sometimes comes with added perks for getting it set up.
As part of getting your finances organized after college, take a moment to set up automatic payments to your student loan lenders so you can ensure on-time payments every month. If you’re on a tight budget, you might consider applying for one of the above repayment programs right away, as many offer payments based on your income at the time you apply.
As an added bonus, some lenders might also offer you a slight reduction in your interest for having your account on auto-pay, so it’s definitely worth checking out. For more information on getting your finances in order, take a moment to explore our guide on borrower budgeting.
One of the biggest mistakes borrowers make is when they get behind on their payments and don’t create an action plan to get back on track. While your lenders may offer some degree of flexibility after missing one or two payments, neglecting your account for long periods of time can have serious consequences. This includes wage garnishments if your loans are delinquent for more than nine months.
Through student loan rehabilitation programs and personalized repayment plans that your lender may already have available, you do have a few worthwhile options for dealing with delinquent student loans. Otherwise, once your student loans default, your credit score will be impacted, and you may be on the hook for other kinds of expenses that only compound the problem further.
If you need more help with the basics of student loans or you’d like more information about any of the programs, contact one of our specialists by phone at (800) 771-6358 or fill out our online form. We can walk you through your options and the benefits you have available as a financially savvy borrower.