Deciding to go to college is an exciting milestone in a student’s academic journey, but the cost is often a primary concern for many students. It is expected to wonder, “How will I pay for my education?”
Whether you are a recent high school graduate attending college for the first time, an adult who’s decided to return to school, or a college graduate navigating the repayment process, understanding student loan debt can bring a sense of relief and control over your financial future.
In this blog, East Ohio College (EOC) will provide you with the essentials to understand the types of student loans and strategies to help you keep student loan debt manageable. Keep reading to learn more about understanding student loan debt!
What Are Student Loans?
According to the Department of Education, a student loan is funds borrowed to pay for school expenses that must be repaid with interest. Student loans may come from various sources, including the federal government, private banks or credit unions, financial institutions, and other independent organizations.
Student loans are a valuable tool that allows many students to further their education that may not be available otherwise. In fact, according to the Education Data Initiative, 42.7 million Americans have some degree of student loan debt. While the amount each student owes varies based on tuition cost, type of loan, interest rate, and other factors, it is no secret that student loans make furthering education possible for many students.
The Different Types of Student Loans
The different types of student loans available should be understood along with their unique terms. Loans can be categorized in two ways: federal and private loans. Federal student loans often offer a fixed interest rate and income-based repayment plans, which are preferred over private loans. The Federal Student Aid website defines four types of federal student loans:
- Direct Subsidized Loans
The loan is offered to undergraduate students with financial need who meet specific criteria. The U.S. Department of Education pays the interest on these loans while the student is in school at least part-time through the first six months after graduation, known as a grace period or during a deferment period.
- Direct Unsubsidized Loans
This type of loan is available to undergraduate students regardless of their financial need. Individuals are responsible for the interest on the loan beginning when the loan is taken out, even during the six-month grace period or deferment.
- Direct PLUS Loans
This type of loan requires a parent or guardian to undergo a credit check and loan application on behalf of the student. These are also known as Parent PLUS loans.
- Direct Consolidation Loans
This type of loan is a tool for students with multiple eligible federal loans to consolidate into one larger loan. This can be beneficial in managing monthly payments, having a fixed interest rate, and having access to specific repayment plans.
Private loans are another option for students who may not be eligible for federal student loans or need additional funding but have exceeded federal loan borrowing limits. Banks, credit unions, and other financial institutions offer private loans; however, it is essential to review the terms and conditions closely before taking a private loan out because the interest rate is often higher. This type of loan has more strict repayment requirements.
Strategies To Manage Student Loan Debt
While student loans often get a bad reputation, they can be a helpful tool for students who need funding to get the training necessary for their dream careers. Large amounts of student debt can be avoided by making wise financial decisions, following a budget, and being disciplined with money management. Below are three strategies that can help manage student loan debt.
- Make Payments During School and The Grace Period
Many federal loans do not require students to make a payment while in school or during the first six months after graduation– known as the grace period. Making a monthly payment, however small, can reduce the overall amount of debt owed upon graduation.
- Only Borrow What You Need
Another way to minimize the student loan debt you’ll have to repay is only to borrow what you need for school. Calculate the total amount you’ll need for tuition and other school-related expenses and only borrow that much. Avoid using student loans for things like housing, transportation, and entertainment.
- Refinance Or Consolidate
This option is an excellent resource for college graduates with multiple federal loan monthly payments or high interest rates to consolidate their loans into a single payment. One of the downfalls when choosing to refinance or consolidate is that the loan terms may be extended, meaning you’ll be paying longer. Before consolidating, consider the pros and cons of this course of action and contact multiple lenders to find the best solution for you.
East Ohio College Is Here To Help!
The EOC financial aid* team is here to assist you while navigating the process of applying for student loans and can offer advice and knowledge to help you make smart financial decisions. Throughout the admissions process, you will meet with a financial aid team member to discuss your situation and develop a plan for funding your education.
Your dream career is possible with the help of East Ohio College! Get started in one of our nursing, allied healthcare, or professional services programs today by requesting information.
*For those who qualify.