Lori Meadows
Student loans are a common way to pay for college tuition and other expenses. They can be federal or private and are usually disbursed directly to the school, which deducts tuition, fees, and other expenses before giving the student any leftover money. Federal student loans are the best first option for paying for college due to their benefits, but they have limited use for past-due tuition. Private student loans can be used for past-due tuition, but they come with different requirements and risks. Students facing financial hardship have several options for assistance, including emergency funding, grants, scholarships, work-study jobs, and part-time jobs.
| Characteristics | Values |
|---|---|
| What can student loans be used for? | Tuition fees, textbooks and supplies, on-campus room and board, off-campus housing, transportation, study abroad expenses. |
| What can't student loans be used for? | Non-education services (e.g. cleaning, gym fees), entertainment (e.g. streaming, concerts), clothing and shopping (e.g. new tech). |
| What to do if tuition is past due | Contact the school's financial aid office to discuss options, including emergency funding, payment plans, grants, scholarships, work-study opportunities, and private student loans. |
| How to get student loan funds | Accept financial aid through your student account, receive disbursement to your student account, or pick up a check or direct deposit. |
| Types of student loans | Federal student loans, private student loans, Sallie Mae undergraduate loans. |
| Factors affecting eligibility | Credit history, income, cosigner availability. |
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What You'll Learn
Student loan disbursement
Student loans can be used to cover the cost of tuition and other expenses. Federal student loans are the best option to pay for college because of the benefits they offer. These loans can help pay for current tuition fees and other expenses, and schools can also use them to cover up to $200 toward past-year expenses. To apply for federal financial aid, you must fill out the Free Application for Federal Student Aid (FAFSA). This application allows schools to determine your eligibility for federal, state, or institutional aid, including grants, scholarships, or federal student loans. It is important to submit the FAFSA on time, as some aid is awarded on a first-come, first-served basis.
Private student loans are another option for students who need help paying for college. These loans can be applied for at any point during the year and can be used to pay for outstanding tuition balances. However, it is important to compare different private lenders and ensure that the funds can be used for past-due tuition. Private lenders may also have minimum loan amounts, interest rates, and credit and income requirements.
Once you have been approved for a student loan, the funds will be sent to your school, which is known as a disbursement. Loan funds may be divided into multiple disbursements, usually one per semester. After your loan has been disbursed, your school will automatically deduct the cost of tuition, room and board, meal plans, and other fees from the total amount. If there is any money left over, you will receive the remainder as a check or debit card. It is important to remember that this is still loan money that you will have to pay back with interest.
In addition to student loans, there are other ways to pay for college, such as work-study programs, part-time jobs, scholarships, and grants. It is recommended to start with these options before considering private student loans.
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When to start repaying loans
Repaying student loans can be a daunting task, and it is important to understand when repayment should start. Firstly, it is essential to know that loan repayment for federal student loans typically begins six months after graduation or when you are no longer enrolled as a half-time student. For example, if you graduate in May, your loan repayment will likely commence in November. However, there is an exception to this grace period. If you have previously utilised your six-month grace period as an undergraduate or graduate student, or if you consolidated your federal loans, repayment will start immediately when you drop below half-time enrolment.
The amount you repay monthly is determined by the total loan borrowed. You can find information about your federal student loans, including outstanding principal and interest, by logging into the federal student aid website using your FSA ID. This website will also provide details about your federal loan servicer, the company that collects your loan repayments.
It is important to make timely payments to your loan servicer. Failure to do so can lead to your account being labelled as "Delinquent," and continued non-payment will result in "Default." If you encounter difficulties in making payments, it is crucial to contact your loan servicer immediately. They may suggest changing your repayment plan or applying for a Forbearance period, during which you temporarily stop making payments. Additionally, loan consolidation is an option to simplify repayment if you have multiple federal student loans by combining them into one monthly payment.
Private loans are handled separately from federal student loans. Information about private loan repayments is not available on the federal student aid website. Instead, you should refer to the Financial Aid Award Notices provided by the Financial Aid Office annually or review the Promissory Notes you signed for private loans. Private loan lenders may offer their consolidation programs, and details about these can be found on the FinAid website.
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Grace periods
A grace period is the waiting period between the time you leave school and the time you start making payments on your loans. Typically, you do not have to start paying your student loans right after graduating or withdrawing from your college program. Grace periods are typically six months, but if you are in the military on active duty, this can be extended for up to three years. Repayment of your loan begins after the grace period ends. You will receive a notice from your loan servicer before the grace period ends, informing you about when your payments will be due.
During a grace period, interest will accrue on unsubsidized loans. While making payments during this period is not required, it may be beneficial to do so if you can afford it, as it helps avoid unnecessary interest capitalization. Capitalization refers to the addition of accrued interest during the grace period to the loan principal when repayment begins.
To find out the specific grace period for your loan, you can refer to your loan promissory note, which contains the terms and conditions of your loan, including details about the grace period. If you no longer have the promissory note, you can contact the lender to obtain this information.
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Federal student loans
For most federal student loans, you will start making payments six months after you graduate, leave school, or drop below half-time enrollment. Interest accrues throughout the life of the loan, and monthly payments are not required until six months after leaving school. The amount of interest charged depends on the type of loan and the borrower's circumstances. For example, dependent undergraduates may borrow up to $5,500 as freshmen, while independent undergraduates and dependent students whose parents cannot obtain PLUS loans may borrow up to $9,500. Graduate students can borrow up to $20,500, and dependent students can borrow up to $31,000.
There are several income-driven repayment plans available to help borrowers manage their loan payments. These plans cap monthly payments at a certain percentage of the borrower's income. Public Service Loan Forgiveness is available after 10 years of qualifying payments and employment for Direct Loans (excluding Parent PLUS). The Teacher Loan Forgiveness Program is available for Stafford loans in the Direct and FFEL programs. Teachers with Perkins loans may be eligible for loan cancellation if they meet certain requirements.
The U.S. Department of Education provides information on federal student loan balances and repayment options on its Federal Student Aid website. Borrowers can also find information on studentaid.gov, including resources for estimating monthly loan payments and applying for loan consolidation.
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Private student loans
There are a variety of private student loan options available, and it is important for students to research and compare different lenders to find the best option for their needs. Some key factors to consider include annual and cumulative loan limits, interest rates, fees, and loan terms. Interest rates on private student loans can vary by lender and change over time, so it is important to carefully review the terms and conditions of the loan before making a decision.
It is recommended that individuals first fill out the Free Application for Federal Student Aid (FAFSA) to determine their eligibility for financial aid before applying for private student loans. Private student loans can then be used to supplement any financial aid received and help cover the remaining costs of attendance. The application process for private student loans typically involves a credit check, and students who have not yet established a credit score may need a cosigner.
Overall, private student loans can be a helpful option for individuals seeking to cover tuition and other school-related expenses. However, it is important to carefully consider the loan terms, interest rates, and repayment options before making a decision. By researching and comparing different lenders, individuals can find the best private student loan option for their specific needs and financial situation.
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Frequently asked questions
You need to log in to your student account and accept the financial aid. Your school will then deduct your tuition fees from your loan.
Federal student loans can be used to pay for past-due tuition, but only up to $200. You can also apply for an emergency loan through your school to pay off your balance. Alternatively, you can take out a private student loan.
Your student loan can cover textbooks, supplies, and fees, as well as room and board, meal plans, transportation, and study abroad expenses.
Yes, you can apply for scholarships, grants, or work-study jobs, or use your savings.
Student loans can cover up to 100% of your tuition fees, but this may vary depending on the loan provider and your individual circumstances.
