In addition to government student loans, you can apply for private loans, grants, and scholarships. Understanding how each form of financial assistance can aid you is crucial in making an informed decision about your education.
Below, you will gain invaluable insight into the types of assistance available, benefits and drawbacks, and repayment options.
What are federal student loans?
Before determining if student loan forgiveness is an option, it is worth taking a closer look at student loans.
Student loans are a type of financial aid that can be used for education, room and board, and other expenses. You can acquire student loans through the government or a private financial institution. This type of loan is incredibly easy to qualify for as it is designed to help young adults who may not have built their credit yet.
Student loans must be repaid with interest. The amount of interest you pay will depend on the type of loan you took out. However, several repayment options may be available to you.
The Pros and Cons of Federal Student Loans
Federal student loans offer several benefits and drawbacks to borrowers. By learning more about these pros and cons, you can make an informed decision on your finances.
- Allows you to afford college.
- Student loans allow you to afford a more expensive, better school.
- You can use student loans for other expenses while attending school, including housing.
- Repaying student loans will help you build your credit.
- Your interest rate will likely be between 4.45 and 7 percent.
- You will be starting a career with substantial debt after school.
- Student loan forgiveness is not an option for most.
- Missed payments or defaulting on student loans will damage your credit score.
In addition to federal student loans, you may have the option of acquiring private loans from banks and other lenders. Here are some of the pros and cons of these loans compared to federal ones.
- Can be used to fill in any financing gap after taking out federal loans. Federal loans have a yearly loan limit.
- May receive more flexible borrowing options compared to government loans.
- With a co-signer or creditworthiness, it is possible to get a lower interest rate.
- Must meet credit and income-based eligibility requirements to qualify for a loan.
- Your interest rate may be higher than federal loans.
- Student loan forgiveness may not be available.
- You may have fewer repayment options.
Using Private or Government Student Loans with Grants and Scholarships
Private and government student loans can help you afford higher education. However, these loans are not the only source of financial aid that you should apply for. Grants and scholarships offer financial assistance to qualifying students. These funds do not generally need to be repaid.
College grants are available to assist students based upon their income. The lower your family income, the more awards you may qualify for. Federal grants are also available to students who are striving for specific degrees, such as degrees in teaching.
Scholarships are another great way to obtain financial aid for higher education. You can find scholarship programs through schools, private organizations, and more. To get this form of funding, you must meet a specific scholarship’s eligibility requirements. Qualifications may be based on a variety of factors, including income or academic requirements.
Repayment Options for Federal Student Loans
Government student loans have several repayment options. Generally, students do not need to begin repaying loans until after they are no longer attending school full-time. However, loans must be repaid even if a student did not graduate before leaving school.
Repayment plans typically last for 10 years. However, some repayment options can be extended to up to 25 years. Repayment plans based upon income are also available. These types of programs allow students to pay more when they make more. Temporary deferment options are also available for students who do not have a high enough income to repay their loans.
Is student loan forgiveness an option?
Student loan forgiveness is not an option for most students. You may qualify for student loan forgiveness if you work in a specific industry, such as a teaching or the public service industry. You may also be eligible for your loan to be discharged if you become totally and permanently disabled or if your school closes, rendering your degree useless. In very rare cases, loans may be discharged when filing for bankruptcy. However, this is not usually the case.