The Different Types of Student Loans
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Did you know more than 44 million people in the United States have student loan debt? Collectively, borrowers owe more than $1.7 trillion. Student loan debt has surpassed auto loans and credit card debt to become the second highest consumer debt category.
On average, graduate students in the United States graduate school with ~$71,000 in graduate school loans. If the individual is pursuing a doctorate, 70-80% of students will graduate with debt that is at least $100,000.
Understanding your loans is crucial. Below, we will break down the different types of loans you could apply for. This is the foundation we need to understand to know what type of student loan debt we’re working with and have to pay off.
Federal vs. Private: federal loans are funded by the federal government, whereas private loans are funded by a private lender such as a bank or credit union. It is recommended to start with federal loans, then use private loans to help bridge any financial gap remaining.
Subsidized vs. unsubsidized: subsidized loans are for undergraduates with financial needs whereas unsubsidized is for undergraduates, graduates, and professional degree students without financial need. The interest rates for graduates and professional degrees are higher than for undergraduates. The individual is also responsible for paying the interest during all periods. Your interest will accrue and be added to the principal amount of your loan if you choose to not pay the interest on the loan while in school, during grace periods, or deferment.
PLUS loans: mainly for grad or professional degree students, but parents can borrow them to pay for their dependent undergraduate child too. No financial need is required, but a credit check is required. PLUS loans have a higher interest rate, which is currently 6.28%.
Perkins loans: low-interest federal student loans for undergraduate and graduate students with exceptional financial need. These are no longer offered. But before 2018, you could’ve gotten one.
Do you know what type of student loans you have?
Do you know your interest rates?
Do you have a repayment plan?
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**disclaimer: this is not financial advice. this is only based on my experience. please always do your research.**
