For many college students, loans are necessary to pay for the expenses of higher education. Understanding those loans can get complex, especially if this is your first experience with borrowing money. Even if you’ve taken out a loan before, such as for a car, student loans operate differently in terms of payback and interest.
Where to Start
When you prepare to apply for schools, you can also start looking into financial aid options to pay for school. You’re certainly not alone if you take out loans for school. The Institute for College Success reported that nearly 70 percent of graduates in 2015 had student loan debt. The average amount of debt for graduates in 2016 was $37,172.
You can obtain a loan from a number of lenders. If you have an established relationship with a bank or credit union, that could be a good place to start. Online lenders also offer competitive rates. You can find loan options through the federal government.
Understanding the Types of Loans
Students can choose from two types of loans: private and federal. Private loans come from financial institutions and banks. When you apply for a private loan, the institution will pull your credit to determine whether you qualify and what your interest rate will be, although you can have your parents cosign if you don’t have much credit yet. The interest rates on private loans are usually higher, and the repayment terms tend to be less generous. Continue reading What to Do If You Can’t Pay