Student loans provide many college students the opportunity to finance their education. Being well-informed on the nuts and bolts of student loans may make it even easier to fund your education, while still keeping your eye on long-term goals like starting a career and saving for the future.
10 Student Loan Questions, Answered
This post will dig into 10 of the most common student loan questions and share some practical tips. These FAQs range from the process of getting enough funding, choosing between federal and private loan options, calculating the costs and benefits of attending college, and learning what is a grace period for student loans.
1. How Can I Get Enough Student Loans?
An important first step is to accurately fill out the Free Application for Federal Student Aid (FAFSA®). Students need to fill out a FAFSA form every year they’re in college to be eligible for federal student aid, including grants, federal student loans, and work-study programs. After the FAFSA is reviewed, students receive a letter describing the options available to them, such as which federal loans or grants they are eligible to receive. (Be sure to check the deadlines for the different federal aid programs—they can and do differ.)
In some cases, depending upon your financial situation (and, usually, your parents’ financial situations), you may find all the help you need from FAFSA sources. Other times, this is just one step of your search. Types of loans you’ll automatically be considered for through your FAFSA application include Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS Loans.
2. How Do I Fill Out a FAFSA Form?
You can fill out a FAFSA form online (or you can print one out and mail it in). If you’re going the online route, you’ll need to create a username and password—and, in many circumstances, your parents will need to as well. It’s in your best interest to submit the FAFSA as early as possible because some aid is awarded on a first-come first-served basis, and states and schools may run out of money to award.
After you have filled out the FAFSA once, you can select the Renewal FAFSA option in years following, which allows a significant amount of information you’ve already submitted, including student demographic info, to be auto-filled from previous applications.
You’ll also need to list which schools should receive your FAFSA information, including those you’re considering but haven’t applied to yet. You’ll also need to include both your and your parents’ financial information, which can be streamlined if you use the IRS Data Retrieval Tool (DRT) .
3. What is the Difference Between Private Student Loans and Federal Ones?
Federal loans are funded through the government and are strictly regulated. To qualify for them, students must fill out the FAFSA. Private loans, on the other hand, are not subsidized by the government.
Students who choose to move forward with a private student loan, may want to check with the school they plan on attending to see which lenders they work with. Then students are able to apply directly through those lenders. Another alternative is to contact the lender to see if they work with the school.
Recommended: Private vs Federal Student Loans
A student’s credit history (and their parents’ credit history) is not considered for most federal student loan options (federal PLUS loans are a notable exception), although it often is considered as part of the application for a private student loan. And while financial need is a factor for federal loans, it isn’t for private ones.
It’s important to investigate all options, speak to a qualified financial advisor, and make the best possible choices for your personal situation (which may ultimately involve a mixture of the both federal and private student loans), as taking out a private student loan can result in a loss of federal benefits, like income-based repayment options or loan forgiveness.
4. How Much Does College Cost?
The average cost of college varies widely depending on the type of college you plan to attend—from around $22,180 a year for a public, two-year college to $50,770 a year for a private, four-year college for the 2020-2021 school year.
Most important to you, of course, will be the cost of the college you choose to attend. Once you’ve chosen a school, you can calculate tuition costs and subtract scholarships, grants, and money you’re able to pay up front.
It’s also smart to set up a budget for your college years. Things to consider include costs like college textbooks and other supplies, lab fees, testing fees, parking fees if you plan to have a car at school, food beyond what’s covered by the meal plan, and everyday living expenses.
5. Is College Worth the Cost? What Are the Benefits?
College represents an investment in yourself and your future, and only you can decide how much that’s worth. So, we’ll focus instead on the potential benefits of going to college. The most obvious benefit is that, if you want to pursue certain careers, you’ll likely need the appropriate college education and training.
Studies show that college graduates earn significantly more money, accumulated over a lifetime, than those who did not attend. Earning your degree of choice requires a solid plan and commitment, and these are excellent strategies and skills to develop before entering the working world. Plus, people often make lifelong friendships at college, and many universities have a strong alumni network, which can be helpful on many levels as you begin your career.
6. What Can Student Loans Be Used For?
Funds must be used for education-related expenses. These include college tuition and fees, room and board, textbooks and other school supplies, and transportation to and from school.
Recommended: Using Student Loans for Housing and Living Expenses
Most students find themselves with additional expenses while they are at college, such as travel expenses outside of transportation to and from school, and meals outside of the school’s meal plan; these are not generally eligible expenses for student loan funds, so creating a budget (see #4) before applying for student loans may be a good idea.
7. What is a Grace Period for Student Loans?
Although not all student loan payment plans are alike, most come with a six-month grace period, which means you’ll typically need to start paying back your loans six months after you graduate, drop below half-time enrollment, or drop out of college altogether.
The student loan grace period is designed to give students a chance to find employment before their monthly loan payments kick in. Check with your loan holder to see what the grace period on your loans are. Armed with that information, you can better consider how those grace periods (or lack thereof) might impact your future plans.
8. How Do I Repay Student Loans?
Repayment on federal student loans generally begins after the student’s six-month grace period. The standard repayment plan for federal student loans is 10-years, but borrowers are able to select one of the other repayment plans at any time without incurring any costs.
Federal student loans also offer income-driven repayment plans, which tie the borrower’s monthly payment to their income. While this may make the loan more expensive in the long-term, it can make the monthly payments more affordable. When deciding on a repayment plan, review factors like your income, estimated monthly payments on the student loan, and your overall budget. Overtime, you may find it helpful to reevaluate the payment plan you’ve selected as your financial situation may change.
Depending on your situation, student loan refinancing can also lower your monthly payment. Many online lenders consider a variety of factors when determining your eligibility and loan terms, however, including your educational background, earning potential, credit score, and other factors.
To determine the repayment options available with a private student loan, check directly with the individual lender.
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9. Can I Repay Student Loans Early?
The short answer is yes, it’s possible to repay your student loans early. There is no loan prepayment penalty for paying more or for paying off the balance in full before the due date. (You may want to reach out to your lender first to fully understand how they intend to apply your additional payments.)
Depending upon the repayment plan and type of loan you choose, you typically have 10 to 25 years to pay back your loans, with a minimum payment calculated based upon how much you owe and the length of the loan. You should have the option to select from different repayment plans, such as an income-driven repayment plan. If you don’t choose a repayment plan, you will be automatically enrolled in the Standard Repayment Plan, which is a 10-year repayment plan. (You can also change your repayment plan at any time.)
If you need help figuring out your monthly payment, you can use a tool like SoFi’s student loan calculator. This can help you decide if you want to stick with your current repayment plan, or switch to a different one.
10. How Can I Apply for a Private Student Loan?
If you decide to apply for a private student loan to help pay for college, take the time to look around and compare lenders. Many lenders will allow potential borrowers to get pre-qualified to find out how much they may qualify to borrow and at what rates.
Review factors including interest rate, loan terms, any additional fees associated with the loan, and the repayment plans available at each lender. Another thing that may be worth considering is if the lender has any sort of programs for borrowers who run into financial difficulties down the road and may have trouble making payments on their student loans. For example, SoFi has an Unemployment Protection Program that allows eligible borrowers to temporarily pause payments on their student loans should they lose their job through no fault of their own.
Student loans can be instrumental in helping students pay for college, but there is a lot to understand about how they work before borrowing. Broadly, there are federal or private student loans. Federal student loans are backed by the federal government and come with unique benefits like income-driven repayment plans.
Private student loans are awarded by private lenders and generally require potential borrowers to undergo a credit check as one factor during the application process. In general, private student loans are considered after a student has exhausted all other financial aid options. This avenue tends to be used by students as a last resort because private student loans do not come with the same borrower protections as Federal student loans.
Private student loans at SoFi have absolutely no fees and qualifying borrowers can secure a competitive interest rate with an entirely online application process.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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