So, you’re heading off to college, and you’ve deduced that you need to take out a student loan in order to make it work financially. You’ve heard all the horror stories and you know all the statistics. You’re aware that there’s over $1.3 trillion in total student loan debt spread over 44 million graduates, and this is very intimidating to you. Fortunately, you are not without help. There are several different student loan lenders available, and depending on your personal criteria, you can pick a loan that’s right for you. In fact, College Raptor has a handy (and free) Student Loan Finder tool to help you out! Here are some points to compare when picking where your loan will come from:
Simply put, this shows how much you’ll have to pay on top of the initial money you receive from the loan company. Without accruing interest, lenders would not be able to operate, as they’d be either breaking even or operating at a loss. This is the first aspect of a loan most students look at, as it provides an indication of expenses to take into account after graduation. Interest rates differ by company, plan, and personal financial standing, but most are somewhere from 2.5% to 9%. Understanding your student loan interest rate is vital to picking your loan plan, and the statistics will be available online, so do your research before you make up your mind.
All loans are not created equal, thus, they are not expected to be repaid in equal time. Varying repayment plans exist, from installments that ask you to give a concrete percentage each month to “pay as you go” plans. The latter option is often favored by recent graduates due to its concern for your personal income. “Pay as you go” plans take your financial status post-graduation into account, meaning you will only be asked to pay what the lender deems to be a realistic amount for your salary (income-driven). Additionally, if you are between jobs, your payments will be frozen until you regain your financial footing. Repayment plans and interest rates are often directly related, so both require a great deal of simultaneous consideration before a decision is reached.
This is a personal choice, and more of an overarching theme than the specifics of repayment or interest. If you’re someone who does not like to be weighted down financially without being able to change your options, make sure you do not sign up for a plan that etches your installments in stone. For example, “pay as you go” plans are usually best for those of us who like to know that we are not locked into future financial decisions. However, other, more procedural-minded people may not want to jump through the hoops of changing their repayment plans, because they know they’ll be able to pay off any installments. If you fall into the latter category, flexibility probably isn’t a priority for you. Student loans are a personal—and tremendously important—decision, and it is best to have all the information in front of you before you sign a contract that will affect much of your immediate future.
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