Comprehensive Guide to Student Loans

Oct 19, 2024

Lecture Notes: Understanding Student Loans

Introduction to Student Loans

  • Significant part of college financing for many students.
  • 69% of 2019 graduates took out loans, averaging $30,000 in debt.
  • Important to understand loans before completing college.

Importance of Loan Exit Counseling

  • Required to understand loan terms and repayment.
  • Often not taken seriously enough by students.
  • Beneficial to learn about loans regardless of current status.

Financial Aid Overview

  • Components: Grants, scholarships, merit awards, work-study.
  • Student loans often part of a larger financial aid package.
  • Repayment usually begins several months post-graduation.

Types of Student Loans

  1. Private Loans

    • Provided by non-government lenders (banks, credit unions, etc.).
    • Variable or fixed interest rates.
    • Typically unsubsidized; borrower pays all interest.
    • Not eligible for federal forgiveness programs.
    • Possible to refinance, but requires a good credit score.

  2. Federal Loans

    • Funded by the government.
    • Types: Direct Subsidized, Direct Unsubsidized, Direct PLUS (for parents).
    • Subsidized loans have interest paid by government while in school.
    • Unsubsidized loans accrue interest during school.
    • Fixed interest rates, no credit check required.
    • Provide flexible repayment options and deferment.

Repayment and Deferment Options

  • Private Loans:

    • Early repayment during school can save money.
    • Repayment terms affect monthly payments and total interest.
    • Options for forbearance and deferment vary by lender.
    • Refinancing available with good credit.

  • Federal Loans:

    • Can change repayment plans anytime without penalty.
    • Plans include Standard, Graduated, Extended, Income-Based.
    • Public Service Loan Forgiveness (PSLF) available for qualifying jobs.

Public Service Loan Forgiveness (PSLF)

  • Requires full-time work for a qualifying employer.
  • Forgives loan balance after 120 qualifying payments.
  • Challenging to qualify; low success rate historically.

Conclusion

  • Student loans are a common and often necessary part of financing education.
  • Critical to understand loan agreements and repayment responsibilities.
  • Loans are not free money; important to have a realistic perception.

Resources

  • Further episodes on financial management tips available on "The Financial Diet" YouTube channel.

These notes serve as a summary of the key points discussed in the lecture on student loans, providing a comprehensive overview of the main ideas and details you need to remember.