Student Loans - Part Four: Other Considerations

Wrapping Up The Series

We just finished up our first series: student loans! This episode is a wrap up of the series where we will just touch on a few of the main ideas. You can check out the individual episodes or recaps in the tabs above!

Types of Student Loans

Federal loans are obtained through the federal government. There are many types of these loans. Here are a few:

Subsidized = Need based loan

   -The government pays the interest while the student is in college, with a six month grace period after graduation

Unsubsidized = Not need based

  • Anyone can receive this one, interest begins when the loan is given out

Parent PLUS = Under the parent's name, credit, and Social Security Number

  • Can NEVER be transferred to the student

  • Has higher interest rate

Graduate PLUS = For graduate students

  • Loan option for graduate students with a slightly higher interest rate

  • Benefits like deferment and grace periods

Private Loans = From banks or financial institutions

  • Credit-based

  • May or may not be better interest rate, depending on your credit score

  • Don't have perks of Fed Loans, like loan forgiveness

Repayment Options

There are so many forms of repayment for student loans. Here are a few of the main options:

Standard (default) - Standard is the plan you will be automatically enrolled in if you do not choose a different one. It's a 10 year plan with 120 equal payments that are the same amount the whole way through. 

Graduated - This plan is also 10 years with 120 payments, but payments start lower and increase every 2 years. This is helpful if you have a combination of private and federal loans or will start with a low paying job after school.

Extended - The extended plan can be up to 25 years, but to qualify you must have at least $30,000 in student loans. It has smaller payments over the extended period.

Pay As You Earn (PAYE) - You will use 10% of your discretionary income to pay back your loans and after 20 years the rest is forgiven. However, you have to pay taxes on the forgiven amount in that specific year!

SOMETIMES this can be more expensive than the standard plan

Revised PAYE - Graduate loans can be forgiven after 25 years of payments of 10% of income.

Income Based - 15% of discretionary income is used to pay back the loans and after 20 years the rest is forgiven.

There are even some ways to get student loans forgiven. The most popular is Public Student Loan Forgiveness, but there are other options too.

Public Service Loan Forgiveness (PSLF) - If you work for a government organization, if you work for a tax-exempt non-profit, or you work for a non-profit whose main purpose is public service, you qualify for this. You have to make 120 payments, not necessarily continuously, the rest of your loans are forgiven. 

If you do this, don't forget to change from the standard repayment plan!

Make sure to choose your student loan repayment type based on your other expenses and expected salary.

Pay off as much as you can as quickly as possible! You'll save TONS on interest.

Consolidation vs. Refinancing

Consolidation and refinancing are often confused! Here's the difference:

Consolidation is taking all your federal loans (only federal loans) and combining them into a single federal loan.

Keep in mind that if you consolidate, all the benefits that come along with federal loans will go away.

Refinancing is taking an outside loan to pay off your existing loans. This is typically done in the private sector, often through banks or credit unions. Your interest rate for refinancing will be based on your credit score.

Closing Thoughts

"Money Tip of the Week"

Start saving every $5 bill you get! Okay, it doesn't have to be $5's, it could be every $1 or every $10 bill, but this will add up so quickly. There are other options too, like the Acorns app, that will round up the cents from each purchase you make and place them in a mutual fund.

We truly hope that this series was beneficial for you and your future! If you know anyone else with student loans feel free to pass this along. Reach out if you have any more specific questions and thank you all for the support!