Understanding Student Loans

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Let’s make this simple.

UHEAA is committed to helping students succeed. We understand the pressures of paying for college and your needs while you’re in school. Student loans shouldn’t be your first choice to pay for college and you may be better off if you don’t end up using student loans at all. Here are a few tips about paying for college and the role of student loans.

We recommend that you search and apply for as many scholarships as possible and utilize all the federal student aid options available (federal grants, work-study, and student loans) before considering borrowing private education loans. Apply for federal student aid by submitting the Free Application for Federal Student Aid (FAFSA).

If you do decide to borrow money to pay for your education, we recommend that you look at federal student loans first, then if you still have financial need find out more about private student loans. Make sure you have a plan to repay your student loans, including a plan for dealing with financial difficulties. Always contact your lender or loan servicer if you are having trouble repaying your loans.

Find out more about the starting wages of people in your major. This is important for you to know what you can afford to borrow. Your college or university should have this information. A general rule of thumb is that your student loan payments should be less than 10% of your take home pay.

Federal Student Loans: Loans funded by the federal government. Programs: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans (for graduate and professional students or parents), and Federal Perkins Loans.

Private Student Loans: Loans made by a lender such as a bank, credit union, state agency, or a school. Programs: There isn’t a standard – private loans differ by type and lender.

Woman on graduation day, in gown, holding up her diploma
Understanding all of your options.
You need to understand all of your student loan options. When it comes to paying for college, federal student loans offer several distinct advantages over private loans (benefits, repayment plans, grace period, etc.). Sometimes you may not know about these because they don’t appear on your TV late at night, or pop up as an ad in the middle of a game you are playing on of your phone or tablet. That being said, this page goes over the most basic and important differences between each of these options.
What are some of the benefits of federal student loans?
  • You will not have to start repaying your federal student loans until you graduate, leave school, or change your enrollment status to less than half time
  • Many federal loans provide you a grace period, a period of 6 or 9 months after you leave school, before you start repaying your loan.
  • The interest rate is fixed and is often lower than private loans—and much lower than some credit card interest rates.
  • Undergraduate students who demonstrate a financial need will most likely qualify for a subsidized loan.
  • For these loans, the government pays the interest while you are enrolled in school at least half-time.
  • You don’t need to get a credit check for most federal student loans (except for PLUS loans), and federal student loans can also help you establish a good credit report.
  • You won’t need a cosigner to get a federal student loan in most cases.
  • The interest you pay may be tax deductible.
  • Loans can be consolidated into a Direct Consolidation Loan, which can often make repayment a much simpler process.
  • If you are having trouble repaying your loan, you may be able to temporarily postpone (deferment, forbearance) or lower your payments.
  • There are several repayment plans, including an option to tie your monthly payment to your income.
  • There is no prepayment penalty.
  • You may be eligible to have some portion of your loans forgiven if you work in public service.
  • Loans made by a lender such as a bank, credit union, state agency, or a school.
  • Programs: There isn’t a standard – private loans differ by type and lender.
  • Have more questions? Contact us today.