Credit
Financial loans are an example of installment credit. Loans are complex and their terms may seem confusing, but they can provide needed money at a time when you don’t have it. Many people use financial loans to pay for a car, house, education, or assistive technology.
Learn more about how loans work, when to consider one, questions to ask, and how to evaluate loan terms in this three-part blog series on understanding loans by Pennsylvania Assistive Technology Foundation.
If you decide you want to take out a student loan, and you have determined how much money you’re comfortable borrowing (and eventually paying back), you have options about which lending program to use. There are two major sources of student loans: federal and private. Learn more about the types of federal student loans.
The options for going to school have exploded in recent years. If you decide to continue your education after high school, you’ll want to compare your options. You may want to attend a school nearby or to a place that requires travel. You may also decide to attend an online program. Before you make your decision, you should investigate how you’ll fund your education.
College can be expensive and a student loan may seem like an attractive way to fund your degree. But, think carefully about where you want to go, what you want to study, and how much money you will need to borrow in order to attend school. The more money you borrow, the longer your commitment to paying it back and the more you’ll ultimately pay in interest. Be sure to research all your options for funding your education, including scholarships, financial aid, grants, work-study, and resident assistant programs.
If you decide you want to take out a student loan, and you have determined how much money you’re comfortable borrowing (and eventually paying back), you have options about which lending program to use. There are two major sources of student loans: federal and private. These loans may have either a fixed or variable interest rate. Unlike the interest you are paid when you save money in a bank or credit union, this interest will cost you!
Federal student loans are loans available from the U.S. Department of Education federal student loan program and are typically called “Direct Loans.” Direct Loans may be either subsidized or unsubsidized or a combination of both. The interest rate you pay on all Direct Loans is fixed; however, the amount you can borrow using Direct Loans is limited so, some people use private loans from banks or credit unions to fill the gap. The interest on private loans is typically variable.
Direct Subsidized Loans are available only to students with financial need. The U.S. Department of Education will pay the interest on the Direct Subsidized Loan if you are in school half-time (registered for at least six credits per semester) and for the first six months after you leave school.
Direct Unsubsidized Loans do not require that students have financial need. You do not have to pay the loan back while in school half-time; however, the interest accrues when the loan funds are disbursed to the school.
Learn more at studentaid.gov/understand-aid/types/loans.
Private student loans come from banks, credit unions, and other types of lenders and are based on the credit history of the borrower so they are harder to get. Interest rates for most borrowers are higher than Direct Loans and typically are variable so they can be more expensive in the long run.
College can be expensive and a student loan may seem like an attractive way to fund your degree. But, think carefully about where you want to go, what you want to study, and how much money you will need to borrow in order to attend school. The more money you borrow, the bigger a commitment you’re making to paying it back—and the more money you’ll ultimately pay in interest. Be sure to research all your options for funding your education, including scholarships, financial aid, grants, work-study, and resident assistant programs.
The Federal Pell Grant is a grant available to undergraduate students who display exceptional financial need and have not earned a bachelor’s, graduate, or professional degree. Learn more about Pell Grants and find out if you qualify.
One missed payment can result in a delinquency, and multiple missed payments can result in a default. This will have a severe negative impact on your credit. Avoid these problems by researching your options for delaying your payments if you find yourself in a position where you can’t afford them for a period of time. And be aware, it is very difficult to get discharged from a student loan—in fact, they are one of the only types of loans that will not be discharged even if you file for bankruptcy! One exception: if you are totally and permanently disabled, you may qualify for a total and permanent disability (TPD) discharge of your federal student loans. With a TPD discharge, you will no longer be required to repay your loans. Learn more about total and permanent disability discharge.
