Repaying Federal And Private Student Loans
- Federal student loans: Following a six-month grace period, you generally begin to make payments.
- Private student loans: Youll generally have a six-month grace period. If you elected to make in-school fixed or interest payments with our , youll continue to make those payments during your grace period. After that, youll begin to make principal and interest payments.
What Are My Repayment Plan Options
Your repayment options will vary depending on the type of loan you borrowed.
Parent PLUS loans are eligible for a few different plans, including the standard 10-year plan, graduated repayment plan and extended repayment plan. You can also adjust payments on the income-contingent plan, but only if you consolidate your parent PLUS loan into a direct consolidation loan first.
If you opt for a private parent loan, youll typically choose your repayment plan when you initially borrow. Most lenders offer repayment terms between five and 10 or 15 years. Use a student loan payment calculator to estimate your monthly payments on each term.
Whats more, read your loan agreement carefully to find out when repayment begins. While some lenders let you defer payments while the student is in school, others expect you to start paying it back right away.
The information in this article is accurate as of the date of publishing.
Benefits Of A Student Loan
For many students, taking out a student loan is the only way higher education becomes attainable. Getting a good education is often a catalyst for a successful and stable career.
Paying back a student loan on time after college can also be a good way to build your credit.
If you use the money to pay for a degree in one of the highest-paying college majors, it might be easier to pay off your loans. Still, it can be hard to get a job after college, no matter what you studied.
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Student Loan Payment Pause
In December 2021, the U.S. Department of Education announced an extension of the student loan payment pause until May 1, 2022. But if you filed a borrower defense loan discharge application, you may not have to make payments when the payment pause ends. Check for updates on borrower defense at the Federal Student Aid website to see if this applies to you.
Best Student Loan Consolidation: Splash Financial
Private student loan consolidation, also known as student loan refinancing, can be a smart way to lower your interest rate and save money over the life of your loan. Splash Financial is our pick for top student loan refinancing company.
Theres a couple different factors that impacted our decision:
- Interest rates: Splash Financial offers very low interest rates: variable rates as low as 1.74% and fixed rates as low as 2.30% .
- Cosigner release: Typically, Splash borrowers can request a cosigner release after making 12 consecutive monthly payments on time.
The minimum refinance loan amount is $5,000. There is no maximum loan amountit will depend on the specific lending partner that refinances your loans and other factors in your loan application. In order to refinance through Splash Financial, you must have obtained a 4-year degree from a Title IV accredited institution or an associate degree in an eligible field.
Read the full review: Splash Financial Student Loan Refinancing
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What Is Student Loan Forgiveness
One big advantage of federal student loans is their regulations regarding forgiveness, discharge, and cancellation. All three terms refer to no longer being required to make payments on your student loans.
You may qualify for student loan forgiveness or cancellation if you lose your job or find work in an approved field, such as education and the nonprofit sector. Discharge typically occurs if you become permanently disabled and cannot work.
Parents who take out a PLUS Loan may also qualify for student loan forgiveness if their child’s school closes down or if their child becomes permanently disabled. Additionally, you can discharge some federal loans by declaring bankruptcy.
If you think you might qualify for student loan forgiveness, discharge, or cancellation, ask your loan provider how to apply. Depending on your loan, you may need to continue making payments while the government reviews your application.
Sallie Mae Student Loan Details
|Undergraduate Fixed APR||3.50% to 12.60% with autopay|
|Undergraduate Variable APR||1.13% to 11.23% with autopay|
|Graduate Fixed APR||4.75% to 12.11% with autopay|
|Graduate Variable APR||2.12% to 11.64% with autopay|
|MBA Fixed APR||4.75% to 11.98% with autopay|
|MBA Variable APR|
Read the full reviewSallie Mae Student Loans review
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Citizens Bank Student Loan For Parents
- Both fixed 3.23% 11.70% and variable rates 1.03% 11.01%available for Citizens Bank student loans for parents
- Rate discount of up to 0.50% offered for autopay and qualifying accounts
- No origination fees or prepayment penalties
- Parent student loan terms of 5, 10 years
- Loan amounts from $1,000 to $350,000
- Multi-year approval option, so you can secure funding for multiple years with one application
- In-school interest-only or immediate repayment options
Best For Refinancing: Commonbond
- Min credit score: Not disclosed
- Terms: 5-20 years
Specializing in refinancing student loans, CommonBond offers competitive rates for refinancing and multiple payment terms.
Option to refinance parent PLUS loans to the student
Refinance up to $500,000 in student loans
Not available in Mississippi and Nevada
Higher minimum borrowing amount of $2,000
Co-signer required for student loans
While CommonBond has some tough competition for student loan refinancing, it pulls ahead thanks to offering some of the best interest rates. Refinancing rates start at 1.98% APR on variable-rate loans, 2.26% on fixed-rate loans, and 2.97% APR for a hybrid rate option. CommonBond also offers regular undergraduate student loans.
The unique hybrid-rate refinancing loan offers a fixed rate for the first five years and then switches to a variable rate. This can be a great option for borrowers who want to prepay this debt or get a headstart on repayment with a lower rate.
CommonBond has a wide range of student loan refinancing terms, from five to 20 years, so you can balance time repaying the loan with affordable monthly payments. It also offers hardship forbearance. However, deferment is not specified on CommonBonds website .
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Eligibility Requirements You Can Meet
Lastly, you might want to consider your creditworthiness. Youll need a good credit score, reflecting a solid credit history and a low debt-to-income ratio, to qualify for private student loans for parents. If youre unlikely to qualify on your own, you might need to apply with a cosigner.
A similar rule applies to the parent PLUS loan. While you dont need excellent credit, anyone with adverse credit wont qualify unless they add an endorser to their application.
Sallie Mae Parent Loan
- Fixed 3.50% 12.60% and variable rates 1.13% 11.23% available
- 0.25% rate discount for autopay enrollment
- No origination fees or penalties for prepaying Sallie Mae student loans
- 5, 15 years term on student loans for parents
- Student loan amounts from $1,000 up to certified cost of attendance
- Option for interest-only payments while student is enrolled, for up to 48 months
- Available not just to parents, but also to other student benefactors
- Free quarterly FICO credit score updates
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Best Private Student Loans
Heres our list, in no particular order, of some of the best private student loans offered by the top lenders. To compile it, we looked for established lenders offering the best student loan rates and additional benefits, which are detailed below.
Many of these reputable lenders offer the ability to view your potential rate while submitting only to a soft credit check, which wont ding your credit report. Of course, there are other great choices out there, but think of our list as a jumping-off point as you start your research.
And whether you go with one of these or find another student loan lender thats a better fit for you, make sure to shop around so you can get the best deal available for your situation.
Maximum Lifetime Limit For Student Aid
There are lifetime limits on the number of weeks you can receive student aid. This includes interest-free periods while you are in school. Once a lifetime limit has been reached, interest starts to accumulate. You will also have to start paying back the loan 6 months after you graduate or finish your studies.
Full-time students can receive student aid for no more than 340 weeks, except:
- students enrolled in doctoral studies can receive student aid for up to 400 weeks
- students with permanent disability can receive student aid for up to 520 weeks
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We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.
How Do Private Student Loans Differ From Federal Student Loans
Federal student loans are offered by the Department of Education and require you to fill out the Free Application for Federal Student Aid to determine eligibility. Federal student loans should always be considered before borrowing private student loans due to lower rates and friendlier repayment benefits, such as income-driven repayment plans and forgiveness programs.
Unfortunately, federal student loans come with borrowing limits that can limit students ability to cover their entire cost of attendance. Because of this, many turn to private student loans to bridge the gap.
Private student loans are offered by banks, credit unions, and online lenders. These loans typically allow you to borrow up to the total cost of attendance. Unlike federal student loans, you cant fill out one application to determine your eligibility for all private student loans. Each lender sets its own eligibility requirements, typically including income and credit minimums.
Whether you borrow from the government or a private lender, always understand if your after-graduation budget will allow you to pay back your student loans before deciding to use them for your education.
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State Programs For Buying A House In College
Certain states have special programs for graduates purchasing homes within the university’s areas. These programs provide assistance and low interest rates on home loans. Check for available programs in your state through your state housing authority.
- : The Maryland Mortgage Program provides a discounted interest rate and down payment assistance for students with at least $25,000 in student loan debt.
- Michigan: The MI Home Loan program provides discounted interest rates for qualifying graduates and first time home buyers purchasing property in certain cities.
- Ohio: The Grants for Grads Program provides down payment assistance, plus a grant for graduates who qualify.
- Rhode Island: The Ocean State Grad Grant Program provides down payment assistance for those who qualify.
Make sure your financial situation is stable before you buy a home. Scrutinize your repayment plan, existing assets for a down payment, and your emergency and retirement funds before shopping for a loan. Before applying for a home loan, consider increasing your income or lowering your debt.
What Stands Out Among The Best Student Loans
A variety of factors differentiate the best private student loans, though the main ones to focus on are interest rates and fees.
The amount of money you take out on your private school loans is only the beginning. Give yourself the best chance of maintaining a manageable level of debt by keeping your rates and fees as low as possible.
As you review different interest rates, remember that you can apply for more than one loan to see which one will give you your best deal. There are two ways you can do so without your credit score taking a hit:
- Many private student loan lenders do a soft pull on your credit, which enables you to see what you might be approved for without negatively impacting your credit score.
- If you were to file a formal application with more than one lender, you could avoid dinging your credit by rate shopping within a two-week window.
Besides looking for offers for the best private loans for college, also look out for beneficial perks. For example, some lenders offer college students a lower rate for good grades, while others provide the ability to release your cosigner.
Once youve narrowed down your list of options, use a monthly payment calculator to estimate what your regular dues might be.
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Comparing The Best Student Loan Rates
The best private student loan rates range from 2.99% APR to over 14.99% APR, depending on various factors – including your credit score, household income, cosigner, and more.
We recommend using a service like Credible to compare the best student loan rates. With Credible, you can compare multiple lenders in about 2 minutes. Its quick and easy, and will give you a snapshot of what you might see for student loan rates. Check it out here and see for yourself: Credible Private Student Loan Comparison.
Credible doesn’t have every lender available, and it’s important to shop around. When shopping for a student loan, remember that most banks and credit unions will do a “soft pull” of your credit on the initial application. That’s okay. If you do all your loan shopping within a 2 week period of time, it shouldn’t hurt your score overall.
When you do a formal application, the lender will do a hard pull. You should only move to this part once you’re ready to go.
Finally, remember it can take about 30 days to complete the application from start to finish. If you’re looking to start college in August, you should probably have your loans all ready to go no later than July. Start shopping now! You can find the best private loans here.
Using Student Loans For Personal Expenses
To attend college, you wont only have to pay for tuition and fees youll likely also have to cover personal expenses like college housing, textbooks, and transportation. Because of this, both federal and private student loans can be used for personal expenses while youre going to school.
Keep in mind:
With private student loans, you might be able to borrow up to your schools cost of attendance, depending on the lender.
If you decide to take out a private student loan, be sure to consider as many lenders as possible to find the right loan for your needs. Credible makes this easy you can compare your prequalified rates from multiple lenders in two minutes.
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Which Fees Should I Look Out For When Choosing A Private Student Loan
Just like you should read the fine print on a credit card, you should understand the fees you might incur on private student loans. Some lenders will add your fees to the loan principal. When you apply for a private student loan, seek out answers to the following questions:
- Is there a loan application fee?
- Is there a loan origination fee?
- Which types of fees could I incur for making a late payment?
- How do I pay the fees?
How Do Private Student Loans Work
For private student loans, you typically shop around with banks, credit unions and online lenders to find the best overall loan offer for you. Unlike federal loans, private loans are credit-based, meaning that your eligibility and terms will depend on your credit history. If youre a student with a thin or poor credit file, you could improve your application by adding a creditworthy cosigner.
Once youve gained approval, your lender will certify the funding amount with the college or university youre attending. You may be allowed to borrow up to 100% of your cost of attendance, minus other financial aid. The funds are usually disbursed directly to the school, with any leftover amount credited to you later.
Your private lender may have a loan servicer that manages the repayment of your debt. Keep in mind that private loans have few safeguards if you run into trouble after leaving school, so theyre often used as a supplement for federal loans, rather than as a substitute.
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What Are The Different Types Of Student Loans
Typically, student loans fall into two major categories: federal and private. Private loans are also called alternative loans.
Federal student loans: There are multiple types of federal loans but, in general, they have lower interest rates and better repayment terms than private loans. Theyre also more readily available and may be easier to obtain than a private loan. They have fixed interest rates and some options arent dependent on your credit history.
Private student loans: These should be looked into after federal student loans are exhausted. Private student loans may cover continuing education without a degree, tuition for non U.S. citizens, and for education costs incurred after graduation.
In a recent interview with Carrie Johnson, an Accredited Financial Counselor and an associate professor at North Dakota State University, she said “Federal student loans have many repayment benefits. For example, there are forgiveness options for certain occupations or in the event of a disability. If a borrower is struggling to make payments, there are options to suspend payments for a period of time. Private student loans do not offer these benefits and in many cases, if a borrower passes away, their cosigner is then responsible for the remainder of the loan balance.”