Student loans are a fact of life for most. That said, you’re living the statistic that student loans are now the biggest debt held in the U.S., surpassing even what Americas owe on their homes. Tuition costs have risen during the economic crisis—and those under 25 have the highest rates of unemployment. Graduates of WCSU typically leave with about $23k in debt.
The upshot is that you’d best borrow as little as possible, as inexpensively as possible. Don’t let your debt exceed your likely starting salary. To do so greatly increases the chance of default, Mark Kantrowitz, creator of FinAid and publisher of FastWeb, has said.
- The best loan? A subsidized Stafford loan—if you qualify for this federal loan, based on financial need. Interest-free until after graduation.
- The worst loan? A private loan, typically.
- Not a financial need case? Your best option is likely to be an unsubsidized Stafford federal loan, at 6.8% fixed.
Federal loans now are all made directly by the government under the Direct Loan Program (formerly known as FEEL).
See other recent legislative changes to the program here.
Types of Federal College Loans
1. For all:
Stafford’s, unsubsidized for students; PLUS loans for parents
2. For those with financial need:
Stafford’s, subsidized; Perkins (in cases of extreme need)
Different types of loans can be combined. Each has a dollar limit (amongst others) and there is limit on total federal borrowing.
First, you apply to the FASA to see what needs-based loans you may be entitled to, and then to the Dept. of Education for other federal loans, with proceeds processed by the WCSU financial aid office.
Who Should Borrow, Parents or Students?
Some say students should always borrow first, since their parents can’t take out loans for retirement. PLUS loans can fully bridge the gap between financial aid and what college costs. Parents must start repaying right away whereas students get until six months after graduation to start repaying their student loans.
The Problem with Private Loans (see government warning). Expensive; unpredictable (variable interest rates); and inflexible on how you repay them: that’s why millennial money champion Zac Bissonnette, below, calls them a “potential disaster”.
New Loan Options:
Loan Repayment/Consolidation Some options are discussed on the site of the WCSU Financial Aid Office.
Understand APR vs. interest rate. The annual percentage rate (APR) is what you’ll actually pay.