College life is a significant milestone with no shortage of expenses.
According to a recent College Ave Student Loans® survey, 95% of all the parents surveyed were currently helping or planning to help their child pay for college. In some cases, that help comes in the form of a loan.
With student loans, you’re entering an agreement that may have an impact on your finances. That’s why it’s important to know all the details and proceed accordingly.
Here are three things to keep in mind for students and their families who need student loans to help pay for college this year:
Know the difference between federal and private loans
After scholarships and grants, student loans can help you cover any remaining costs. Start with federal student loans in the student’s name which come with low fixed rates and special benefits not found on private loans. Federal student loans have annual loan limits though, and for the remainder of your expenses, a private student loan is worth considering.
Below are some key points about private student loans that differentiate from federal loans:
Private loans funded by banks or online lenders like College Ave Student Loans:
- Typically offer both variable and fixed rates
- No origination fees
- Students will likely need a cosigner because they have a limited credit history
Loan repayment terms — what are they?
Your loan term is the amount of time in which the lender expects you to pay off what you borrowed.
The standard repayment term for most federal loans is 10 years; however, you have the flexibility to change repayment plans even after you take out the loan. Which is right for you depends on your financial situation. If you can afford to pay the loan off in less time, you will accrue less interest over the life of the loan.
With private student loans, either the loan term is assigned or some lenders, like College Ave, let you choose your loan term. College Ave offers a variety of repayment options, as well as loan terms from 5 up to 15 years. You can also reduce your interest rate by 0.25% if you set up auto-pay.
It’s important to consider all the options, seeing as the repayment term and option will have an impact on your monthly loan payment and finances.
Who is eligible for student loans?
While federal loans and private loans have different eligibility requirements, they do overlap in some regards.
For instance, students must typically be enrolled or accepted into an eligible school or program and be making satisfactory academic progress as defined by the school.
To access federal student loans, you’ll have to complete the FAFSA. For a private student loan, all applicants and cosigners will have their credit checked to determine eligibility and interest rates.
If you do need to borrow to help pay for college, it pays to take the time to do your research, borrow only what you need, and have a solid plan on how you’ll repay the loan.