5 Essential Student Loan Facts Every Student Should Know

The cost of a college education is higher than ever before. Higher education costs have gone up to almost three times the cost in 1980; a fact that holds for both public and private institutions. These rising costs have sparked the need for more funding options for college education. Student loan funding stands at the top of the list. But are students aware of what they are getting into? Do they have the correct student loan facts? Whether you are considering taking your first student loan or are already in the system, knowing these five facts about student loans could help.

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Overview: What Is A Student Loan Debt?

If you don’t have enough to pay for college, you may consider taking out student loans. A student loan debt will include any loans you take to cover your higher education that you will repay with interest later. Student loans can help cover all college-related expenses, from tuition fees to accommodation and food.

When applying for college, your school will assist with your student loan as part of your financial aid package. There are two types of student loans to choose from:

• Federal loans 
• Private loans

The government provides federal student loans, which are more accommodating with fixed-interest rates and income-driven repayment plans. In the United States, the department of education provides direct subsidized loans to eligible students based on university guidelines. 

On the other hand, private loans are provided by financial institutions like credit unions and banks. Though they are more accessible, private loans could be more expensive in the long run when considering the interest rates and other loan terms. 

Student loans are more popular than ever, with about 70% of college graduates receiving student loans. Young adults seek opportunities to discover and develop their professional skills through college and university education. These important student loan facts will help prospective and current students and their parents understand this global phenomenon better.

Your Future Earnings Serve As Collateral for Your Student Loan Debt

When you take a mortgage loan, the collateral is your house. And when you take a student loan, your ability to earn money in the future is your collateral. The student loan lender (a bank or the government) has the right to take your wages, tax refund, and social security as compensation if you default.

Due to this, student loans are not easy to discharge in bankruptcy. Bankruptcy allows you to liquidate your assets to repay your debt and cancels the remainder if you cannot repay it. However, with student loans, you can pay as long as you can earn. You can only get student loan forgiveness if you are disabled and cannot earn any more money to repay your loans. 

Before enrolling, gather as much information about financial aid from your university as possible to reduce your loan amount. Consider the following tips to keep your loan to the bare minimum:

• Inquire about student interest rate discounts.
• Fill out a scholarship application.
• Apply for work-study on campus or off-campus part-time work.
• Speak with your employer about educational opportunities or financial assistance.

You Can Borrow To Cover Living Costs Even If You Have Financial Aid For Tuition Fees

Student loans are available to help cater to your college tuition fees and all related expenses. If you are privileged to have financial aid that fully caters to all your tuition fees, you can still take a student loan to avoid struggling with living expenses.

According to a National Postsecondary Student Aid Study, student borrowing patterns among those with full-tuition scholarships and grants are similar to those who must pay tuition. Consider your future earnings so you can take a loan that will not become a burden but still get the most out of your college life.

You Will Start Paying Your Student Loan Debt Once Your Course Is Over

 A collection agency should refrain from pursuing you for unpaid balances while you are still in school because student loans are paid in arrears. You will only have to make payments once your university course is over.

For Federal Direct Student Loans, you will have a six-month grace period. A few private student loans also have a grace period of six months. Check with the private institution you borrowed to determine when your payments begin.

You Must Repay Your Loans Even If You Don’t Finish College

Many students attend college in an effort to find themselves. This is not a smart move. The cost of college is high, and things change. In many of these tales, the student leaves college without a degree and a sizable amount of student loan debt to pursue a dream.

The truth is that your student loan debt still belongs to you, whether you finish school or not. Even if you drop out, you still have to pay back the money you spent on school. Know that whatever your plans are after college, you must pay back your debt. Though vocational school can be a fantastic option, keep in mind the overall cost of education after graduation.

You Are Not the Only One Taking a Student Debt Loan

Student debt is at an all-time high due to the rising cost of college tuition and the general cost of living. You are not the first to take on student loans and won’t be the last. Student loan statistics show that there are many student loan debtors of all ages. In fact, Americans owe more on college loan debts than on credit cards.

Here are some student loan statistics you should know;

• Total student loan debt is $1.75 trillion (including federal and private loans)
• The average debt per borrower is $28,950.
• Federal student loans account for about 92% of total student debt; the remaining comprises private student loans.
• In public four-year institutions, 55% of students had student loans.
• 57% of students attending four-year private nonprofit institutions took on student loan debt.

These figures show that more people are relying on student loans for higher education. Try to minimize your expenses in every way possible to get the most out of your college loan. 

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