Learn How to Turn Your Student Loans from a Burden to a Benefit.

Popular Federal Student Loans in 2024

1. Direct Subsidized Loans

• Eligibility: Available to undergraduate students with demonstrated financial need.
• How to Apply: Complete the Free Application for Federal Student Aid (FAFSA).
• Features: The U.S. Department of Education pays the interest while the student is in school at least half-time, during the deferment period, and for the first six months after graduation.
• Repayment: Students generally have a six-month grace period after graduation before repayment begins, with several repayment plan options, including income-driven repayment plans.

2. Direct Unsubsidized Loans

• Eligibility: Available to undergraduate, graduate, and professional students; no requirement to demonstrate financial need.
• How to Apply: Same as subsidized loans, through the FAFSA.
• Features: The borrower is responsible for all interest, which accrues during school, grace periods, and deferment.
• Repayment: Similar to subsidized loans, with multiple repayment options based on the borrower’s income and financial situation.

3. Direct PLUS Loans

• Eligibility: Available to graduate or professional students and parents of dependent undergraduate students; requires a credit check.
• How to Apply: Complete the FAFSA and a separate Direct PLUS Loan application.
• Features: Borrowers can take out up to the cost of attendance, minus any other financial aid received.
• Repayment: Repayment begins immediately after the loan is fully disbursed, but students can apply for deferment.

Popular Private Student Loans in 2024

Private student loans are offered by banks, credit unions, and other private lenders. Each lender has different requirements, rates, and terms, making comparison crucial.

1. Sallie Mae

• Eligibility: Available to full-time, half-time, and less-than-half-time students.
• How to Apply: Direct application on the Sallie Mae website.
• Features: Offers loans for all types of degrees, with the option to defer payments until after graduation.
• Repayment: Multiple repayment plans including deferred, fixed, and interest-only payments while in school.

2. Citizens Bank

• Eligibility: Available to students and parents with good credit histories.
• How to Apply: Apply online directly through Citizens Bank’s student loan section.
• Features: No origination fees and lower interest rates for those with existing accounts at the bank.
• Repayment: Offers 5, 10, and 15-year repayment terms, with interest-only payments available while in school.

3. Discover Student Loans

• Eligibility: Available to students enrolled at least half-time in an eligible school.
• How to Apply: Online application through Discover’s website.
• Features: Covers up to 100% of the certified cost of attendance. No fees, including no late fees.
• Repayment: Offers in-school deferment and a grace period, with cash rewards for good grades.

How to Choose and Apply

When choosing between federal and private student loans, consider federal loans first due to their lower interest rates and more flexible repayment options. If additional funding is needed, private loans can fill the gap. Always compare offers from multiple lenders to find the best rates and terms.

To apply for federal student loans, start with the FAFSA, which will determine your eligibility for all types of federal aid. For private loans, apply directly through the lender’s website, ensuring you understand the terms and your repayment obligations.

Consequences of Not Paying Student Loans

1. Delinquency and Default

• Delinquency: Your loan becomes delinquent the first day after missing a payment. Most lenders report delinquency to credit bureaus after 90 days, which can significantly harm your credit score.
• Default: Federal student loans enter default after about 270 days of non-payment. For private loans, the default time frame may be shorter. Defaulting on your student loans leads to more severe consequences than delinquency, including potential legal actions, wage garnishment, and the withholding of tax refunds or Social Security benefits.

2. Damage to Your Credit Score

• Failing to pay your student loans on time can lead to negative entries on your credit report, which can severely damage your credit score. This can affect your ability to obtain credit cards, car loans, mortgages, and sometimes even employment.

3. Increased Financial Burden

• When you default, you may face additional fees, penalties, and increased interest rates, which can significantly increase the total amount you owe.

4. Loss of Eligibility for Further Aid

• Defaulting on your student loans makes you ineligible for further federal student aid, which can be detrimental if you plan to continue your education.

Measures to Take if You Cannot Repay Your Loans

1. Contact Your Loan Servicer

• The first step should always be to contact your loan servicer. They can provide you with information about your repayment options and help you choose the best strategy based on your financial situation.

2. Consider Deferment or Forbearance

• Deferment: This allows you to temporarily stop making payments or reduce your payment amount if you are experiencing significant hardship, such as unemployment, illness, or returning to school.
• Forbearance: If you don’t qualify for deferment, you might be eligible for forbearance. Though interest continues to accrue on your loans during forbearance, it can provide temporary relief if you’re facing financial difficulty.

3. Explore Income-Driven Repayment Plans

• Federal loans offer several income-driven repayment plans that calculate your monthly payment based on your income and family size. These plans not only make your monthly payments more manageable but also offer the possibility of loan forgiveness after 20-25 years of qualifying payments.

4. Look into Loan Rehabilitation

• If your federal student loans are in default, loan rehabilitation is an option. This involves agreeing to make nine on-time monthly payments within ten consecutive months. Upon successful completion, your loans will be removed from default status, which can help restore your credit and make you eligible for benefits like deferment, forbearance, and loan forgiveness.

5. Consider Refinancing

• For private loans, refinancing can be a way to lower your interest rates and reduce monthly payments. However, refinancing federal student loans with a private lender means losing federal protections, including access to income-driven repayment plans and potential forgiveness programs.

Overview of Student Loan Forgiveness

Student loan forgiveness programs are designed to relieve borrowers from the obligation to repay part or all of their federal student loan debt. These programs are often targeted at those who work in certain professions or who have met other specific criteria.

Key Student Loan Forgiveness Programs: Tips For Cutting Costs

1. Public Service Loan Forgiveness (PSLF)

• Eligibility: You must work full-time for a government agency or a non-profit organization. You need to make 120 qualifying monthly payments under a qualifying repayment plan while working for a qualifying employer.
• Process: Submit the Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application to certify your employment while you make the 120 qualifying payments. After making your 120th qualifying payment, you can apply for PSLF.

2. Teacher Loan Forgiveness

• Eligibility: Teachers must work full-time for five complete and consecutive academic years in a low-income school or educational service agency. They must have taken out loans after October 1, 1998.
• Process: After completing five years of qualifying teaching, you can apply for Teacher Loan Forgiveness by submitting the Teacher Loan Forgiveness Application to your loan servicer.

3. Income-Driven Repayment (IDR) Plan Forgiveness

• Eligibility: Available to borrowers who enroll in one of the federal government’s four income-driven repayment plans. Generally, forgiveness under an IDR plan requires 20-25 years of qualifying payments.
• Process: You must annually recertify your income and family size. Once you have made the requisite number of payments, you can apply for forgiveness through your loan servicer.

Other Forgiveness Opportunities

4. Perkins Loan Cancellation and Discharge

• Eligibility: Available for Perkins Loans, if you work in certain professions such as teaching, nursing, or law enforcement. The amount forgiven increases with the number of years of service.
• Process: Apply through the school that made the loan or your loan servicer. The application must detail your qualifications and verify your service.

5. Closed School Discharge

• Eligibility: If your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loans.
• Process: You can apply for a closed school discharge by contacting your loan servicer with proof that you were enrolled or on leave when the school closed.

6. Borrower Defense to Repayment

• Eligibility: If a school misled you or engaged in other misconduct in violation of certain state laws, you might qualify for this discharge.
• Process: You must submit a claim to the U.S. Department of Education. If approved, you may have your loans fully or partially discharged.