Financial Aid

7 Things High School Students Should Know about Student Loans

Everything you need to know about student loans before you borrow.

Kathryn Knight Randolph

June 06, 2022

7 Things  High School Students Should Know about Student Loans
Figure out student loans before signing on the dotted line.
Taking on any debt isn't ideal. However, student loans may be the one thing that will make your collegiate dreams possible. Therefore, it is important to fully understand student loans now so you can decide which solutions are best for your situation.

What is a Student Loan?

Student loans can be private or federal. Students use student loans to help pay for college. The idea is that student loans are available to U.S. students to fill the gap when paying for college. In other words, student loans should be taken after your college tuition and expenses are covered first by grants (like the Federal Pell Grant) scholarships, income from a part-time job, Federal Work-Study programs, and 529 college savings plans. Student loans consist of borrowed money, from the federal government or a private lender, to make tuition payments while a student is enrolled in school. After graduation, the borrower must pay back the money borrowed with interest.

How do Student Loans Work?

Before you apply for a student loan you should be sure to apply for the Free Application for Federal Student Aid (FAFSA). The FAFSA is required to qualify for any need-based financial aid. It is important college students renew their FAFSA yearly, too. After completing the FAFSA you may earn grants and work-study to help you fund your college education. The money you still owe must be covered to enroll in and attend the college you are attending. Some students and families find they still need more funds to cover their tuition costs. If this is the case, the next recommended step is to apply for federal student loans, such as a federal unsubsidized student loan, first. To apply for a private student loan, you need to apply directly with the student loan lender you choose. You want to avoid huge amounts of student loan debt.

What You Should Know about Student Loans

According to Educationdata.org, after parent contributions and scholarships, student loans are the third most common way students pay for college.
how-america-pays-for-college-2022
Federal student loans have set interest rates and these loans provide the lowest interest rates of any type of student loan. The U.S. Department of Education establishes the federal student loan interest rates. You will be expected to pay back each student loan and, in most cases, the loan interest will capitalize; over time, unpaid interest will add up, increasing the amount you owe. So, it is important you select the loan option with the best interest rates. Do your research when looking for private student loan lenders! Below are seven things you should know about student loans:

  1. Student loans are part of the financial aid package.
  2. Most people correlate financial aid with grants and scholarships – or free help – but student loans are also part of the package. They technically serve as help to pay for school, regardless of the fact that they must be paid back after graduation. When you receive your financial aid package from each school, don’t assume that everything listed is grants or scholarships. Look carefully at each item, and call your school’s financial aid office if you have questions.

  3. There are two types of federal student loans.
  4. Federal loans fall into two categories: subsidized and unsubsidized. To be eligible for any of these loan options, students and their families must submit a FAFSA.

    Subsidized Student Loans

    Subsidized student loans are reserved for students that have financial aid, and the federal government pays the interest while you’re in school.

    Unsubsidized Student Loans

    Unsubsidized student loans are available to all students, regardless of financial need. However, students are responsible for paying all interest on the loans.

  5. If federal student loans don’t cover the cost, investigate private loans.
  6. Though you may be awarded federal student loans in your financial aid package, they still might not cover the total cost of attendance. To find a private student loan, contact your school’s financial aid office and ask about their preferred lender list. This list is put together by the schools and offers a comprehensive look at who they work with, which might be helpful as you navigate the private loan arena.

  7. Loan payments aren’t due immediately after graduation.
  8. Fortunately for borrowers, graduation does not bring an onslaught of student loan bills. Rather, you’ll get a six-month grace period during which no payments need to be made. This allows borrowers to find employment before they have to take on monthly loan payments.

  9. There is such a thing as student loan forgiveness.
  10. Student loans can be forgiven – but you must meet quite a few requirements. Public Service Loan Forgiveness requires that you have a job serving in the public sector with government organizations, not-for-profits, and other types of qualifying public services like law enforcement, teaching, and military service.

  11. Student loans can’t be dissolved through bankruptcy.
  12. While most debts can be terminated through bankruptcy, student loans cannot. They are with you for life – that is, until you pay them off. It should be noted that if you stop making payments on your student loans, the federal government has the right to start taking your wages from work in order to pay the debt. It’s best to make the payments on time and consecutively.

  13. Don’t borrow more than you can realistically handle.
  14. Here’s a good rule of thumb: don’t borrow more than your starting annual salary. Research potential careers and salaries with Monster’s top paying jobs by major tool. Use your findings to establish a cap for borrowing. Borrowing more than what you expect to make will result in paying off more debt for many, many years. Essentially, don’t take on more than you can handle.

    There are many advantages of student loans, if used responsibly.

    Student loans should not be taken lightly. At the same time, student loans should not be viewed as negatively as they oftentimes are – because they’re actually very helpful. These loans help to bridge the gap between what a college costs and what a student can pay. Students get into trouble when they overborrow for college. Getting to know them sooner rather than later can help you plan better for borrowing and repaying. You will be armed with the knowledge of what making payments after college will look like rather than making harmful financial decisions without any idea of their impact. Most 17- and 18-year-old students are not student loan experts. Oftentimes, even parents have difficulty finding the right options for their students and articulating the commitment that comes with making monthly loan payments after graduation. Fortunately, Fastweb provides plenty of student loan help. Our Student Loan Channel explains how education loans work, the type of loans available, and how borrowers can successfully repay them after graduation. We can also suggest private student loan options that will help you pay for college. You don’t have to be in the dark when it comes to federal and private student loan options. Educate yourself in order to make the best decision possible. Get started on Fastweb.

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