By Madision White
(TriceEdneyWire.com) – You hear the dreaded words all the time: student loans. You want to run from them, but can you?
Student loans will likely be a large part of any college student’s life. You know that they’re terrifying, but what else? What are student loans really and how can I understand them? Thankfully, student loans aren’t that hard to make sense of. In fact, they might even be easier than your statistics class.
Here are 10 questions students typically have about student loans:
1. What different types of student loans are there?
Most student loans come in Stafford or Perkins loans. Perkins loans are often more desirable than Stafford loans because of their fixed interest rate (5 percent and doesn’t increase over the years) but have higher eligibility requirements. Perkins loans are also subsidized, which means the government pays your interest while in school and for a short period after. Both are for students with financial need, but unsubsidized Stafford loans can be taken out by any student.
2. How does the interest work?
With most loans, you pay interest on top of what you’re paying back. The larger the loan, the more interest you pay on it. Depending on whether your loans are subsidized, the government will pay that interest while you are in school and for a short time afterwards. The interest rates run at about 6.8 percent for Stafford loans and 5 percent fixed for Perkins loans.
3. When do I have to pay them off?
A grace period is around six months after you graduate before you must start repaying your loans. Unless you have a special circumstance like joining the military or re-enrolling, you should have the six month grace period. Contact your loan servicer if you believe you’ll have trouble repaying your student loans and they may be able to extend the grace period.
4. What makes them different than a normal loan?
Normal loans will acquire interest immediately, while subsidized loan interest may be paid by the government. Also, most loans require credit history while student loans do not. For some, having debt can be seen as a detriment to character, however, few see student loans as a negative.
5. Do my scholarships affect them?
It could. If your financial aid, outside scholarships (not from the school), plus student loans and grants exceed your estimated need, the government requires the school to reduce the financial aid it awards you.
6. What is the difference between a loan and a grant?
Simply put, loans are money that you have to pay back and grants are money that is given to you and will not have to be paid back. Grants also do not accumulate interest. Grants can be thought of similarly as scholarships.
7. How does work-study play in?
A work-study job is an on-campus job paid by the university. It is often given as a form of financial aid. The university keeps an amount of money and pays work-study students out of that fund as a form of helping alleviate expenses. Work-study jobs often result when high quality students apply too late for scholarships, but still have financial need.
8. What happens if I don’t graduate?
Depending on when you drop out of college, the amount you owe could change. If you drop out too soon, you may have your federal aid retracted and be left owing more tuition than expected. You will still be required to pay your student loans despite not graduating. Consider going to school part-time to extend the period of repayment; as long as you’re enrolled, your loans will be kept in tact and won’t have to be paid until you’re entirely out of school.
9. What makes me eligible?
Financial need is often determined by filling out the FAFSA. It takes in a number of factors to determine your financial need like income, savings, children, and many others. Universities use this to determine how much financial aid you should be awarded. There isn’t a super clear way to determine your financial need without filling this out or something similar.
10. Who do I talk to about loans?
Google has lots of answers online and at your fingertips; however, if you seem to be in a special situation, it’s best to seek personal help. Your university has a Financial Office and they will be the people who know the ins and outs of student finances better than anyone. No question is a stupid question. In fact, they’ve probably heard it all before.
College can be complicated, but funding it doesn’t have to be. Learning more about student loans can make them seem manageable and far less scary. Ultimately, do your research and know what you’re getting into before the bank statements start to roll in. You’ll thank yourself later.