In 1993, less than 20% of students earning their bachelors degree did not take out student loans. As of today about 68% of current students borrow annually.
WIthin the last twenty-five years, tuition has quadrupled in price, raising faster for anyone in the middle or lower class to keep up.
Federal Stafford Loans
With so many offers and FAFSA’s not-so-user-friendly format, students and parents are stumped about which loans to utilize. The Federal Stafford Loan is designed specifically for students. Borrowers are to repay their debt six months after graduating college or after they’ve started their job outside of the university.
Some facts about the Federal Stafford Loan:
- Students regardless of their income qualify for the Stafford if they are enrolled at least half time and complete the FAFSA.
- The loans have a fixed interest rate.
- Students receive the same rates regardless of credit scores.
- The loans offer a student repayment plan based on grad’s current salary.
- The loans offer a public service student loan forgiveness program
Unsubsidized Vs. Subsidized
If possible, stick to subsidized stafford loans. Students who qualify for subsidized loans do not need to worry about interest accruing while they are in school. Interest will begin to build once qualified students graduate. However, those granted an unsubsidized loan will accrue interest while they attend school.
Student Loan interest rate on subsidized loans has lowered substantially to 3.4%, however, this is subject to change at the beginning of the new student loan year. The interest on unsubsidized loans sits at 6.8%. The department of Education and Congress continue to debate whether the lower interest rates should be kept.
Which Do I Qualify For?
Your college or university will inform you which financial aid packages are available to you (i.e scholarships applied, grants, and loans). In your financial aid package you will find a breakdown of what loans you qualified for. Subsidized loans are usually awarded to those whose family makes under $50,000. It is common to see both loans available to you.
The amount you can borrow is broken down in the chart below. This is the maximum amount a dependent student can borrow per year:
What You Need To Know:
If you can avoid loans, do at all costs. Borrowing can be a heavy burden, but not a defeating one. If possible, also try to avoid borrowing over the general maximum of $27,000 and keep an eye on the interest. Pay during school if you can, but if not do not worry too much. Payment plans will be set accordingly. Remember to utilize subsidized loans when possible!