What are the Best Student Loan Options ? If you’re a student in the US, it’s more than likely that you’re going to need some sort of financial assistance to complete your degree. Unfortunately, education is not cheap, and tuition rates are increasing. Once you start looking at student loans, though, it can be overwhelming to know what your best options are. To help you out, we’ve rounded up all your choices so you can make the most educated decision on what’s best for your situation:
Federal Stafford Loan
The Federal Stafford Loan is available to undergraduate and graduate students. It has a fixed interest rate, and loans are awarded based on financial need. The loan can be used for tuition/fees, room/board, and books. Repayment of the federal Stafford loan begins six months after graduation or dropping below half-time enrollment status in an undergraduate program or two years in a master’s degree program (unless you’re still enrolled in some form of postsecondary education). You must repay the loan over a 10-year period.
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Federal Perkins Loan
If you’re eligible for a Federal Perkins Loan, your school will be able to tell you if they offer this option.
Federal Perkins Loans are a need-based loan program that offers low interest rates and flexible repayment terms. It is also one of the most popular student loans in America because it’s affordable, flexible, and easy to access—and can be used at any college or university in the country.
The requirements for Federal Perkins Loans include:
- You must have financial need as determined by your school.
- Your family must meet IRS eligibility requirements for tax information (1040).
- You must have been accepted into an eligible program of study at an eligible school located within the U.S., its territories or possessions (or its international offices) since July 1st 2016; not all schools allow students outside their state/country boundaries to apply for this loan type but most do! Check with yours first before applying elsewhere!
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Federal PLUS Loan
- The PLUS loan is a federal loan for parents of dependent students. These loans can be obtained with good credit, and the amount is based on the cost of the school and not your income.
- Interest rates are fixed, not variable. This means that you don’t have to worry about interest rates suddenly going up while you’re paying off your student loans. It’s also helpful because it saves time—you won’t have to keep up with changing interest rates as they change over time with this loan!
- PLUS loans can be used at any accredited school in the U.S., public or private, including community colleges and trade schools as well as four-year universities and graduate programs (although there are some limitations on which types of graduate degrees are eligible).
Private Student Loans
Private student loans are not a good option for students. Private student loans have higher interest rates and lower limits than federal loans, as well as fewer repayment options. You can often borrow less money with a private loan than you could with a federal loan (or in some cases, no money at all). If you need to borrow more than the federal limit, consider getting an additional co-signer or taking out multiple smaller loans instead of one big one.
Home Equity Loans
Home equity loans are another option for students who need to borrow more than the federal limits, have a stable, high-paying job, or have a good credit score.
Home equity loans usually require an interest rate of around 5%, which is higher than other types of student loans but may be worth it if you need to borrow more money. The interest rate will also vary depending on your credit history and other factors.
College Scholarships and Grants
- Scholarships are the best way for students to pay for school.
- Scholarships are free money you don’t have to repay.
- Scholarships can be used for tuition, room and board, books, and other expenses.
- Scholarships are awarded based on merit or financial need (or both).
Considering all the student loan options can help you make the best financial decisions.
Choosing the right student loan can help you make the most of your education expenses.
One of the best ways to determine which student loan will work best for you is by using a tool like Credible, which allows you to compare loans side-by-side and decide which one is right for your lifestyle.
How to Choose Best Student Loan Options
Federal Loans or Private Loans?
If you have federal loans and they’re not enough, you might be able to borrow more money. But before you do that, make sure you understand the differences between federal loans and private student loans. Federal loans are much more flexible than private ones:
- Interest rates vary based on your financial situation, but they’re always lower than those of private lenders (around 4% for undergraduates).
- You don’t have to start paying them back until after graduation—and if the economy tanks while you’re in school and jobs are scarce, unemployment protection will let you extend your grace period from six months to up to three years.
- If things get tight financially during repayment, there are several payment plans available (including deferment or forbearance) that allow some breathing room from making payments for up-to-three years at a time.
The interest rate for federal loans is fixed. This means that the interest rate you’re offered when you apply for a loan will be the same throughout your repayment period. Federal student loans also come with certain protections if you lose your job or get sick, like deferment and forbearance options.
Private student loans are variable, meaning that their rates can change over time and often fluctuate depending on current market conditions and other factors like an applicant’s credit score (more on this below). They also come with fewer protections than federal loans, so it’s important to do all the research before signing up for one of these types of financing options.
Paying down student loans is a long and arduous process, but there are ways to make sure it’s as painless as possible. One way is to choose the right repayment option for your situation, which is called “rehabilitation” in the world of student loans.
Repayment flexibility refers to any program that allows students to change their monthly payment amounts at any time during the life of their loan. This could mean changing from a fixed rate that stays constant throughout the life of your loan (like 5%) to an adjustable rate (like 10%). Or it could be something else entirely. Whatever it is, though, by having this flexibility you can decide how much money you want or need to pay each month when it comes time for your payment due date and reduce interest over time by paying more than minimum payments required under standard plans like Standard Repayment Plan or Graduated Repayment Plan.
If you’re interested in pursuing a career in public service, there may be student loan forgiveness options for you.
For example, the federal government offers loan forgiveness to nurses who work in hospitals or clinics that serve low-income populations. This program is called the National Health Service Corp (NHSC) Loan Repayment Program. Other programs are available for lawyers and teachers at certain schools and universities, as well as veterinarians who work at non-profit veterinary clinics. There are also programs available for law enforcement officers and firefighters who work full-time positions in small communities without other resources available to them professionally (like large city police departments).
What will your career be?
If you’re thinking about applying for a private student loan, consider whether your career will allow you to pay off the debt in a timely manner. If you are going into medicine, law or engineering—fields in which it is possible to earn six-figure salaries after graduation—you might be able to get a lower interest rate on a private loan than on federal loans. However, private loans are more expensive than federal loans because they come with fewer consumer protections and offer less flexibility when it comes time to make payments (i.e., they typically have no grace period).
What is your risk tolerance?
Risk tolerance is the amount of risk you are willing to take on. It’s important to understand your risk tolerance before choosing a student loan repayment plan, because the higher your risk tolerance, the more likely you will be able to pay off your student loans faster with one of these strategies.
Lower Risk Tolerance: If you have a lower risk tolerance, then it generally makes sense for you to select an income-driven repayment plan like Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), or Income-Based Repayment (IBR). These plans cap how much money goes towards interest each month and extend how long it takes for loans to be paid off. If a lower monthly payment keeps anxiety at bay, then consider one of these options as they will allow more flexibility in paying back loans over time.
Higher Risk Tolerance: If you have higher risk tolerance levels and want faster results from paying back your student loans early, then consider consolidating federal student debt into one private consolidation loan with a fixed interest rate or refinancing existing federal direct subsidized/unsubsidized Stafford loans with Direct Consolidation Loans that allow borrowers to have an additional six years on their grace period while continuing all existing benefits such as income based repayment plans/public service loan forgiveness etc..
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What type of school are you attending?
Before you even start to think about what type of student loan to pick, it’s important to consider the kind of school you’ll be attending. If you’re going for a private school, tuition rates will be higher than at public ones—and private schools may also expect students to pay more for textbooks and materials.
Private loans can be a good option if your goal is simply to attend an expensive or prestigious institution. These lenders typically offer generous terms that make them more flexible and affordable than federal loans, which generally have fixed interest rates (although they are still quite low). Additionally, they’re easier to qualify for because they don’t require financial need like many federal options do.
The best student loans can help you pay for a college education and set you on a path towards a successful future
When you think of student loans, you might feel a little overwhelmed and worried about what your future will look like. But the truth is that a good student loan can help you pay for college and set you on a path towards a successful future.
- You can use them to get an education. Student loans are one of the best ways to pay for college because they allow you to access money that will help cover tuition costs, textbooks, housing expenses and other necessities for school life. They also give students access to some extra funds to spend on social activities or their future career training needs beyond just their formal education training at school.
- They can help you get a good job after graduation in no time at all! Once they’re paid off quickly after graduating from high school or college (or both!), these types of loans will ensure that no matter what happens down the road with interest rates changing over time — whether they go up or down — there’s always enough cash flow being generated by those payments going out each month so that every dollar counts when it comes time making decisions about things like buying cars/ trucks/motorcycles., buying homes/condos etcetera..
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Pros of Student Loan
You want a higher education.
If you’re considering taking out student loans, it’s important to understand the pros and cons of this financial decision. First and foremost, you need a degree in order to get a job in today’s world. Without higher education, it will be difficult—if not impossible—for you to find employment that uses your natural talents and abilities. You also want to consider how much income potential your chosen career path holds for you before deciding whether or not it is worth going into debt for.
If you decide that getting an education is worth the cost of taking out student loans, make sure that the school itself has a good track record with helping students find employment after graduation. You’ll want them on your side when searching for jobs after college!
Your school of choice may not be affordable without taking out student loans (at least partially).
Many students who take out student loans do so to help them afford the cost of tuition at their school of choice. If you are planning on attending a private, out-of-state college, or an expensive public university, your education may not be affordable without taking out student loans.
On one hand, this isn’t necessarily a bad thing! You can get a degree without taking out any loans—it’ll just take longer and cost more money. On the other hand, it means that while your peers may be graduating debt free with no real worries about making monthly payments after graduation (or even before), you will have tens of thousands of dollars in debt hanging over your head for years after graduation day—and all because you wanted to go somewhere special instead of sticking around home.
Student loans are an investment in yourself.
The cost of a higher education is often greater than the cost of living, so student loans can be a great investment in your future.
Whether you are pursuing your first degree or getting back on track after an interruption in your education, student loans can help you achieve your goals by making it possible to attend college and graduate school. A completed degree increases your earning potential and opens up doors to many career opportunities around the world.
You have more time to pay back your student loans than you would with credit card debt, for example.
One of the biggest pros of student loans is that you have more time to pay back your debt than you would with credit card debt, for example. Student loan payments are spread out over a longer period of time and are often set at a much lower interest rate than credit cards—which means you’ll pay less in interest overall.
Credit card debt isn’t as flexible, either. It’s paid off all at once, so if you can’t afford the minimum monthly payment on your credit card each month, it can lead to some serious financial problems fast (not just from paying high interest rates but also from accumulating late fees). This can make using a credit card as an emergency fund difficult or even impossible if there’s not enough money left over after paying bills each month.
You can take advantage of tax deductions associated with student loan interest paid.
If you’re like most people who have student loan debt, you know that it can be a huge burden. But there are some tax benefits associated with having student loans—and they can make all the difference in paying off your debt faster.
In order to take advantage of these benefits, you have to file as an individual. If you file as married filing jointly, your spouse’s income will be included in your filing status and could affect how much in deductions you’re eligible for. If one spouse has significantly more income than the other spouse (or if one has no income), then it may make sense for them to file separately; otherwise, filing jointly is usually recommended when possible because it allows each person their own standard deduction amount ($12,000).
Also note: The $2,500 cap applies only if both spouses have qualifying student loan interest payments; if just one spouse has qualifying interest payments on their Schedule A itemized deduction form (Schedule A instructions), they would only deduct $1,000 instead of $2,500 total.”
There are student loan repayment options if you hit hard times.
If you’re having trouble making your student loan payments, there are several options available to help. You can change your repayment plan to one that fits your current financial situation. If you want to lower the amount of money you pay each month and keep it lower for a longer period of time, you can do an income-driven repayment (IDR) plan. IDR plans reduce monthly payments for borrowers who have high debt relative to their income and family size.
- Income-Driven Repayment (IDR) Plans – IDR plans forgive any remaining balance after 20–25 years depending on the type of IDR plan chosen. There are four main types of IDRs: Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Each type has different eligibility requirements regarding when payments must begin, how much money is paid towards interest each month versus principal, how long before loans are forgiven or discharged altogether if they aren’t paid off—and more!
If you want to get rid of your loan faster than IRS requires but still don’t think it will happen under an IBR plan then consider switching over into an extended term where forgiveness occurs sooner rather than later which works well if there isn’t much left owing after 25 years under normal circumstances anyways.
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Since there are no prepayment penalties, it is best to pay off the debt as soon as possible.
Paying off student loans as soon as possible is always the best option, unless you are committed to never having any money left over at the end of each month. If you are able to pay off your debt earlier, that’s even better! Here’s why:
- You will save money on interest by paying down your loans faster. Using an example with a 5% fixed-rate loan of $50,000 with a 10-year term and monthly payments of $500 per month, here’s how much interest would be paid if it were paid off over 10 years:
- The total amount saved in interest is $31,241! That means if you’re paying $500 per month toward this loan (which is not unreasonable), just two extra months of payments would save you enough money for another semester or two of college tuition (depending on whether it’s private or public).
- There may be no prepayment penalties associated with federal student loans (some private lenders do charge them).
That’s it! Don’t forget to check out the other articles on our blog because they have even more info about student loans. Do you have any questions? Leave them below and we’ll be happy to answer them!