1. Understanding Student Loans

2. Federal vs. Private Loans There are two main types of student loans: federal and private. If federal student loans don’t cover the anticipated gap between what your family can contribute and the cost of attendance, your school might suggest you take out private loans, too.

3. Federal vs. Private Loans But private loans don’t offer the same protections, repayment options or low interest rates that federal loans do. – best to exhaust your federal loan options before turning to private loans – nearly half of private student loan borrowers in 2011- 12 didn’t take out federal loans when they could have, according to the Institute for College Access and Success — meaning they accepted less favorable loan terms than they were eligible for.Institute for College Access and Success

4. Federal Loans Federal student loans are available to all borrowers regardless of credit history won’t need to pass a credit check or get a cosigner loan interest rates are set by Congress each year, and while different federal loan programs have different interest rates, all borrowers eligible for a particular type of loan get the same rate.interest rates

5. Federal Loans Continued Federal loans have historically had lower interest rates than private loans.interest rates Interest rates on federal loans are also fixed, so they won’t change while you’re in repayment. For loans taken out after July 1, 2015, federal rates range from 4.29% to 6.84%. Federal loans offer all borrowers deferment and forbearance, which are opportunities to stop making payments for a specified period of time if you’re unemployed or experience another financial hardship.deferment forbearance

6. Federal Loans Continued If you have financial need and received subsidized federal loans, the government will pay the interest on your loans while you’re in school or if you defer them when you’re unemployed. You’ll be eligible for Public Service Loan Forgiveness if you work in public service and make 120 on-time monthly payments on your federal loans.Public Service Loan Forgiveness You also have multiple repayment options, some of which tie your payments to your income and will forgive your loans after 20 or 25 years

7. Federal Loans Continued If you miss a payment you often enter a nine- month pre-default delinquency period, which gives you nine-months to fix the problem before collectors come after you Based on the FAFSA – can’t get them without the completion of this document

8. Private Loans READ YOUR AGREEMENT VERY CAREFULLY Need a cosigner based on you or your cosigner’s credit history, meaning the higher your credit score, the lower the interest rate you’ll qualify forcredit score – In August 2015, for example, private loan interest rates ranged from 2.75% to 13.25%, depending on the borrower’s or cosigner’s credit history Can have initial lower interest rates than federal loans but often are variable – can go up or down over time based on the economic index they’re tied to

9. Private Loans Check your private loan agreement to see how often variable rates are adjusted; it could be monthly, quarterly or yearly. Less-frequent adjustments mean fewer opportunities for rate increases. Fewer borrower protections – Private lenders aren’t required to provide deferment or forbearance, though many have similar, somewhat less generous programs.

10. Private Loans Fewer borrower protections continued – don’t offer subsidized loans (will not pay your interest rate while in school or unemplyed) don’t offer income-driven plans, though some offer graduated or interest-only repayment periods. If you miss a payment on your private loans, you’ll most likely immediately go into default – meaning you can be sued by a debt collector and see your credit score take a dive for missing a paymentdefault However: private lenders don’t have the power to garnish your wages or automatically apply your tax refund to your outstanding debt like the feds can

11. Private Loans difficult to get a cosigner removed from a private loan, which can be a major problem if a cosigner declares bankruptcy or dies 90% of borrowers who applied to have their cosigner removed from their loans were rejected by private lenders, according to a June 2015 report by the Consumer Financial Protection Bureau.Consumer Financial Protection Bureau

12. Interest Rates Interest usually begins to accrue after your 6 month grace period monthly student loan payment has two components: the principal, or the original amount of the loan that was disbursed to you, and interest Every time you send money to your loan servicer, you’re repaying a portion of your original loan plus an additional interest charge. Interest rates for federal loans are set by Congress. They may change from year to year, and the new rates generally go into effect on July 1 and are applicable to any loans disbursed after that date Interest rates for federal loans

13. Interest Rates the longer it takes you to pay off your loan, the more interest you’ll accrue plans with longer repayment periods, like extended repayment, will cost you more over time. The 10-year graduated repayment plan, in which your payments start out low and increase every two years, will also accrue more interest than the 10-year standard repayment plan, in which your payments remain steady

14. Interest Rates rates can be fixed, meaning they stay the same for the entire repayment term, or variable, meaning they go up or down based on economic conditions. Variable rates are often lower to start, but they’re riskier. Federal loans generally carry lower interest rates than private loans, making them a more desirable option – But the amount of interest you’ll pay on federal loans can vary based on whether the loans are subsidized or unsubsidized

15. Interest Rates government pays the interest on subsidized loans while you’re in school or during periods of deferment, while borrowers of unsubsidized loans are responsible for interest payments at all times Since federal loans don’t take your credit into account, they often carry more favorable interest rates than private loans do.

16. Calculating interest Interest Rate X Current principal balance ÷ Number of days in the year = Daily Interest – Example: $30,000 loan at 4.29% –.0429X30,000 = 1287 – 1287/365 = $3.53 each day or about $106 per month Interest begins to build up on private and unsubsidized federal loans as soon as your loans are disbursed. Subsidized federal loans are more forgiving and don’t start charging interest until your “grace period” ends, generally six months after you graduate, you leave school or you’re enrolled in school less than half-time

17. Calculating interest it adds up on a daily basis according to a daily interest formula. If interest on your loans accrued while you were in school or during periods of deferment or forbearance — that is to say, during times when you were not making payments on your loan — that amount may be capitalized, or added to your principal. That increases your total loan balance, and ultimately means you’ll pay interest on both your original principal and on the additional interest that accrued.

18. Calculating interest Loan servicers use various methods to determine how much of your monthly payment goes toward your principal and how much goes toward the interest you owe If you decide to make a larger payment than the minimum one month, it’s best to call or email your servicer and let them know that extra amount should go toward your principal. Otherwise, your servicer may apply the extra you pay toward interest only or toward a future monthly payment, which won’t make as big a dent in your overall balance. Pay interest while you’re still in school or when your loans are in deferment or forbearance if you can, and opt for the shortest repayment term you can manage on your budget

19. Loan fees Loan Type First Disbursement Date Loan Fee Direct Subsidized Loans and Direct Unsubsidized Loans On or after 10/1/14 and before 10/1/15 1.073% On or after 10/1/15 and before 10/1/16 1.068% Direct PLUS LoansOn or after 10/1/14 and before 10/1/15 4.292% On or after 10/1/15 and before 10/1/16 4.272% Most federal student loans have loan fees that are a percentage of the total loan amount. The loan fee is deducted proportionately from each loan disbursement you receive. This means the money you receive will be less than the amount you actually borrow. You're responsible for repaying the entire amount you borrowed and not just the amount you received. The chart below shows the loan fees for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after Oct. 1, 2014. Perkins Loans do not have loan fees.

20. Grace periods Most loans offer a post-graduation grace period before your first payment is due. When that ends, it’s up to you to pay your loan bills on time and to change your repayment plan if you can’t afford it.

21. Grace Periods (Federal) Federal Loan TypeGrace Period AvailabilityLength of Time Subsidized and unsubsidized direct loans Yes6 months Subsidized and unsubsidized Stafford loans Yes6 months Perkins loansYes9 months Direct PLUS loans disbursed to graduate and professional students No. But you will receive an automatic deferment on PLUS loans, which will let you postpone payments. 6 months Direct PLUS loans disbursed to parents No. But you can apply for a deferment on PLUS loans, which will let you postpone payments. 6 months, if you apply Grace periods for private loans depend on each individual lender

22. Understanding your financial aid award letter aid package is broken down into a combination of loans, awards, grants and work-study. Financial aid award letters are not standardized, and each school has its own format, making it difficult to interpret and compare them Some colleges won’t even identify the cost on the award letter. Others will include only tuition but not other costs.

23. Understanding your financial aid award letter total cost of attendance should include tuition, room and board, books, supplies, transportation and required fees any student loans will increase the total costs when you take into consideration the interest that will have to be paid. Once you nail down the cost of attendance, you can now focus on the most important factor — net price. The net price is the total cost of attendance, minus any “gift aid.” – Gift aid is money that doesn’t have to be paid back: grants, waivers, scholarships and similar awards.

24. Understanding your financial aid award letter Review your award letter, subtracting gift aid from the cost but not any non-gift aid such as loans and work-study. work-study is not considered gift aid. There is no guarantee of employment, as jobs are first- come, first-served. Families need to determine their strategy for paying this cost, be it through student loans, current cash flow or savings.student loans

25. Understanding your financial aid award letter Beware the gift – Don’t make the planning mistake of assuming that the same amount of gift aid will be available for all four years of college – Some colleges will front-load grant or scholarship money and reduce the awards in subsequent years – talk with the school’s financial aid administrator about the guidelines surrounding your aid package to find out if you can expect award amounts to change year to year.

26. Understanding your financial aid award letter expected family contribution, or EFC, is the minimum amount colleges will expect your family to pay toward the cost of your education – determines your eligibility for need-based aid such as grants and is based on a number of factors, including family income, assets and the number of children in school at the same time. – will be recalculated every year, any anticipated changes in your finances will need to be accounted for since they could affect your eligibility for future gift aid.

27. Applying for fed loans Must fill out the FAFSA You award letter should tell you which loans you qualify for Two federal loan programs – William D. Ford Federal Direct Loan (Direct Loan) Program – Federal Perkins Loan Program Federal Perkins Loan Program

28. William D. Ford Federal Direct Loan (Direct Loan) Program Direct Subsidized Loans are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school. Direct Subsidized Loans Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students, but in this case, the student does not have to demonstrate financial need to be eligible for the loan. Direct Unsubsidized Loans Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Direct PLUS Loans Direct Consolidation Loans allow you to combine all of your eligible federal student loans into a single loan with a single loan servicer. Direct Consolidation Loans

29. Federal perkins loan program a school-based loan program for undergraduates and graduate students with exceptional financial need. Under this program, the school is lender. If you have questions about Perkins Loan eligibility, you will need to contact your chosen school's financial aid office, as each program is different.

30. Private Loans Search Engine for loan options – http://www.simpletuition.com/find-student-loans/ Sallie Mae – https://www.salliemae.com/student-loans/ Nelnet – http://www.nelnet.com/Private-Student-Loans/ Citizen’s Bank – https://www.citizensbank.com/student-loans/

31. Private Loans Social Finance – https://www.sofi.com/refinance-student-loan/ CU Student Loans – http://www.lendkey.com/private-student-loans/?sk=organic Wells Fargo – https://www.wellsfargo.com/student/ SimpleTuition – http://www.simpletuition.com/ Cedar Education Lending – http://cedaredlending.com/ SunTrust – http://www.suntrusteducation.com/

32. More help http://www.thesimpledollar.com/best-student- loans/ http://student-loans-review.toptenreviews.com/ http://www.huffingtonpost.com/credible/3-ways- to-get-the-best-pr_b_7529974.html https://www.consumeraffairs.com/finance/stude nt_loans.html http://www.collegeloan.com/private-student- loans/