Essential Facts About Student Loans
Hi, I'm Danielle.
I'm sure you borrow things all the time – your sister or brother's clothes, your mom's car, a writing utensil from a teacher. What about a student loan?
Know the Facts Before You Borrow
Before you borrow, you want to be sure to know the facts about student loans. The most important is that student loans have to be repaid. Also, interest rates on loans can differ.
Federal vs. Private Loan Interest Rates
Federal loan interest rates are often lower than private loan interest rates and are guaranteed to stay the same interest rate throughout the duration of your loan, while private loan rates may increase every year. Stick with federal loans.
Types of Federal Student Loans
Your loan will either be in the form of a Direct Subsidized Loan and/or a Direct Unsubsidized Loan.
- Direct Subsidized Loans – For students demonstrating financial need. This loan does not accrue interest while you're in school.
- Direct Unsubsidized Loans – Accrues interest while you are in school.
Good News About Student Loans
A student loan does not require a credit check or a cosigner. But here's my advice:
- If you don't need a loan at all, don't take it.
- If you only need part of a loan, only accept the part you need.
- Remember, you have to pay back whatever you borrow plus interest.
Steps to Get a Student Loan
If you believe you will need a student loan, there are three simple steps you need to complete:
- Complete the FAFSA to be awarded a loan.
- Once awarded, complete the entrance counseling.
- Sign a Master Promissory Note for the specific school year.
If you have to borrow money to pay for college, borrow wisely.
FAQs
What is the difference between subsidized and unsubsidized loans?
Subsidized loans do not accrue interest while you are in school, while unsubsidized loans accrue interest during that period.
Why are federal loans better than private loans?
Federal loans typically have lower fixed interest rates and more flexible repayment options compared to private loans.
Do I need a credit check for a student loan?
No, federal student loans do not require a credit check or cosigner.