Student loan debt in the U.S. totaled $1.727 trillion last year — yes, that’s “trillion” with a “t.”
According to the Education Data Initiative, 43.2 million people have federal student loan debt, and the average federal student loan debt balance totals $37,088.
Whether about to begin post-secondary school studies, currently pursuing college or university, or done with school and looking for work, you need to know a thing or two about student loans. Some people are fortunate enough to get scholarships and bursaries to cover costs, and others can rely on parents who are willing and able to cover their tuition.
Many students, however, must get student loans to pursue their education. That can mean graduating with a debt albatross that jeopardizes their quality of life post-graduation.
Here are five things you should know about student loans. You’ll also see what to do if you’re struggling with student loan debt and aren’t sure what to do.
1. You Don’t Have to Take the Full Loan Amount Offered
After applying for a loan, remember you don’t have to accept the full amount offered. So, if you’re granted $30,000 but only need $20,000, think twice before accepting the entire amount. You must pay it back, so accept only as much as you need. You might be tempted to take the full amount and use the excess to cover expenses. But that could come back to bite you when the time comes to repay the loan. It’s in your best interests to accept only what you require.
2. Select a Subsidized or Unsubsidized Loan
When applying for a student loan, you can get a subsidized or unsubsidized loan. Knowing the differences between the two will help you make an informed decision. If you get a subsidized loan, interest charges will start after you reach below half-time enrollment, when your loan has reached a deferment stage, or after the grace period post-graduation concludes. If you get an unsubsidized loan, interest will start during the three periods mentioned above. So, an unsubsidized loan can be more costly in the end.
3. Various Repayment Options Are Available
After graduating, you can repay your federal student loan in various ways. Options include — but aren’t limited to — a graduated repayment plan. Under this plan, your monthly payments will decrease every couple of years. Another option is the pay-as-you-earn plan. Your monthly repayment amounts will be one-tenth of your discretionary income.
4. You Can Get a Private Student Loan
Student loans aren’t limited to federal student loans. If you don’t qualify for a federal student loan or don’t want to go that route, you can also get a private loan. A private student loan might be a better option. At the very least, it’s an alternative worth exploring. You’ll need a creditworthy person to co-sign a private student loan. That can be a parent or someone else. Your parent can also apply for a parent loan to obtain funds for your college education.
5. Consider Interest Rates
Before signing a student loan agreement, consider the interest rates. Some students prefer federal student loans because interest rates tend to be lower for federal student loans than for private student loans. And the repayment terms also tend to be more flexible. A higher-than-average interest rate can make it harder to repay the loan and burden you financially.
Unfortunately, many students struggle with student loan debt after graduating. They should be looking forward to starting careers and building their legacies post-graduation. But they often face years or decades of student loan debt. If you feel like you’re making no headway, it makes sense to get help from a legal professional who can help. You’ll see the available options and get the necessary information to make informed decisions.
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