NASFAA Mention: What You Should Know About Private vs. Federal Student Loans
"There’s no question that higher education in the United States is expensive. According to ValuePenguin, the average total cost of college (including room and board, books and supplies, and transportation) is $25,290 for in-state public schools, $40,940 for out-of-state schools, and $50,900 for private schools. Considering those price tags, it’s no wonder there are currently 44 million student loan borrowers who owe an estimated $1.5 trillion, according to Forbes. For many people, it’s a given that they’ll take out student loans to pay for college," Mic reports.
"The tough decision, though, comes when it’s time to figure out what kind of loans to take out: federal, which are issued by the U.S. government; or private, which are issued by banks, credit unions, and other lenders. Here are the primary differences to consider if you’re currently weighing those options.
... The eligibility requirements vary between federal and private student loans. The government offers two primary types of loans — Direct Subsidized (on which the government pays some of the interest) and Direct Unsubsidized (on which the borrower pays the interest) — but only the former is need-based. 'Some students or families may think that they won’t qualify for federal student loans,' said Erin Powers, director of marketing and communications with the National Association of Student Financial Aid Administrators. 'But even if students don’t qualify for the Federal Direct Subsidized Loan...just by filling out the Free Application for Federal Student Aid (FAFSA), they will qualify for a Federal Direct Unsubsidized Loan.'
... All loans come with interest, but how much interest — and how much you’re responsible for paying — depends on the type of loan you get. 'Federal student loans include various benefits that most private loans do not, like need-based subsidies that prevent interest from accruing while a student is enrolled [and] fixed interest rates,' Powers said. If you qualify for a federal Direct Subsidized Loan, the government will pay the interest while you’re enrolled (at least half-time), for the first six months after you leave school, and during a deferment (a period of time when you temporarily stop making payments or pay less each month). With a Direct Unsubsidized Loan or a private loan, though, you’re on the hook for paying the entire interest yourself.
... Ultimately, both Powers and Kantrowitz recommended exhausting your federal loan options before taking out any private loans. But, the decision can be a complex one, so it’s always worth it to ask for help. 'Financial aid administrators on your college campus are there to help walk you through the process of figuring out how to pay for college,' Powers said. 'They can help you figure out what options are available to you, including how to take out loans, what types of loans you’re eligible for, what amount you may need to take out, and how to plan for repayment. Students who aren’t currently enrolled in college can call or make an appointment as a prospective student at any college or university to talk through the process with a financial aid administrator.'"
NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.
Publication Date: 2/6/2019
