Repayment plans are usually around 1% of hte principal for 10 years, if you take out $20,000 in loans expect to pay roughly $200 a month for the next 120 months. Not a bad loan really, that is only a few thousand in interest. They are usually for up to $7500 a year, depending on how far into school and what level you are (undergrad, grad, medical, etc)
You can get them by filling out financial aid paperwork at the school, and they find them for you. You can also get private loans beyond that if you need them. There are also loans parents take out called PLUS loans.
Student loans are great for financing your education. Not only are they low-interest, they are regulated to protect the debtor making it easy to restructure your debt if you find yourself broke. (As long as you call ahead of time instead of just going into default and praying they don’t sue you!)
There are cons – they typically have a longer repayment period than most loans (other than a mortgage). This is an advantage for those who want to borrow a lot of money and won’t be able to pay a big chunk of it back right away, but they seem to linger and linger and linger once you’ve graduated. (Of course, you can usually pre-pay, but it’s always easy to find some other immediate priority for $$ you’ve already got in your hand.) Another thing is that it’s very easy to consolidate and refinance your loans. However, if you consolidate your new loan may have much stricter default provisions than an original student loan did.
All that said, student loans are an invaluable educational resource, especially for people who are no longer living off their parents. I wouldn’t have been able to finance law school without them – not even close.
I would never had made it thru school without the benifit of student loans. Back in the day (early eighties) student loans had terrificly low interest rates, you could wait up to a year after getting out to start repaying and you could strecth out loans for up to 10 years. I maxed out on loans and only had to repay about $98 a month for 10 years. After the first couple of years it was like I didn’t even miss the money and when the loan was paid off it was like getting a huge raise!
I’m sure things have probably changed a little since then, but the basic principle behind getting the loan is sound. The only shortfall that I have heard about is that if you declare bankruptcy you cannot include the loan payments in it. The government will get paid back on its investment in you no matter what. :eek:
I think they have a $50/month minimum you can pay to avoid defaulting, and $50/month isn’t hard to come up with. But yeah, you can’t really get out of student loans when you declare bankruptcy from what I know. But
For extended and graduated repayment, the following chart shows how the maximum loan term depends on the amount borrowed. But according to the chart you can take a while to pay back loans if you need too get an extended payment plan instead of a standard 1-10 year plan (not necessarily recommended as you pay more in interest, but if you are poor it could come in handy)
Amount Borrowed Maximum Loan Term
Less than $10,000 12 years
$10,000-$19,999 15 years
$20,000-$39,999 20 years
$40,000-$59,999 25 years
$60,000 or more 30 years
There are different kinds of student loans. Stafford loans are processed through the gubmint; a private lender cuts the university a check (or transfers the money electronically), but they’re guaranteed through your state education agency (or the federal government). You can start paying interest while you’re in school, or you can defer interest until you graduate. I recommend paying the interest while you’re in school, because it saves you money in the long run. These also are not credit-dependent, so you can have rotten credit and still get one.
Perkins loans are administered through your university, and how much you get depends on how much money they have.
Free Application for Federal Student Aid. FAFSA. Learn it, love it, live it. Do it every semester whether you need money or not. (side note: if you do drugs, stop now. a drug conviction can get you denied for student aid)
Call your school’s financial aid office. They know everything (and I mean everything) you’ll ever need to know about loans, grants and work study.
Student loans cannot be discharged through bankruptcy, but can be deferred for just about as long as you need. Loan companies are happy to defer them, because they will get more out of you in the long run.