Student Loans 101: Your Guide to Borrowing

The college years bring a vast treasure trove of memories, new friends, experiences and education that will benefit you for life. They can also bring a hefty price tag. We’ve put together some ideas on how to foot the bill without getting stomped by debt.

Make Your Plan
Many students pay for their education by cobbling together a variety of financial aid offerings, grants, scholarships, savings and student loans. When making your plan, start by figuring out what you have (if anything), and what you need.

If you’re like most people, you’ll need some money. Here’s where to start looking.

Ask your financial aid office. Do you have a list of prospective colleges or universities? Chosen one already? See what they offer in financial aid and loans, and ask about work-study possibilities. You don’t have to take what a school offers, but it’s a good place to start. You might want to create a spreadsheet noting what each school offers. This can help you to compare.

Research grants and scholarships. Did you know that County Federal offers educational scholarships? Each year, we award up to 12 one-year scholarships. You can find out more here.

In addition to our awards, you might be surprised at the unusual grants and scholarships available, even if you don’t qualify for money based on academic, athletic or artistic excellence. From the annual “Stuck at Prom” contest using duct tape to create prom attire, to duck calling and advancing the asparagus or potato industry, there are many colorful opportunities for cash. Search for “weird” or “unusual” grants and scholarships online. Here’s one site: https://www.scholarships.com/financial-aid/college-scholarships/scholarships-by-type/unusual-scholarships

Complete the Free Application for Federal Student Aid (FAFSA) form. After January 1 of your senior year in high school, you can fill this out to see if you qualify for grants or need-based loans. Even if you don’t qualify specifically for these, the application might qualify you for some other types of loans.

What to Know About Loans
Student loans can provide a great option to help you finance college. They can come from the federal government, financial institutions and other private lenders.

Student loans typically offer favorable interest rates and don’t require any payments until you leave college or drop below full-time status. (That said, Direct PLUS Loans require that repayment commence once the loan is fully disbursed to you.)

The U.S. Department of Education has two federal student loan programs:

  1. The William D. Ford Federal Direct Loan Program. More commonly called Direct Loans, these make up the largest federal student loan program. There are four types of Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans.
  2. The Federal Perkins Loan Program. These loans are for undergraduates and graduate students with exceptional financial need.

Some Advantages of Federal Student Loans

  • The interest rate is usually lower than private loans and credit cards
  • If you demonstrate financial need, the government might pay your interest while you’re still in school
  • They offer flexible repayment plans and options to postpone repayment if you have trouble making payments
  • Most federal student loans don’t require a credit check or co-signer
  • Some jobs may qualify you to have a portion of the loan forgiven under certain conditions.

Questions to Consider About Student Loans

  1.  Is the loan one your parents must take out, or one you take out?
  2. What is the maximum amount you can take annually?
  3. What are the loan repayment obligations?
  4. Are there any fees?
  5. Does the loan have a fixed or variable rate?
  6. Is it possible to get a lower interest rate?
  7. How much will your total cost be for the loan?

Some Best Practices

Borrow what you need. You might be offered a loan amount higher than what you need. It might be tempting to accept, but remember that you will have to pay it back with interest later.

Watch the deadlines. If you are applying for federal loans, do it as early as you can (or at least by the deadline), because funds can be limited.

Consider making payments right away. Some loans allow you to make payments while you’re still in college. This might sound counter-intuitive (why start making payments when you still need to borrow?), but you don’t have to pay a large amount and it will help you to reduce your total amount.

Understand the terms and keep copies of your loans. Even if you don’t finish your education or get your high-paying dream job right away, you must still make your payments. If you get into trouble, contact your loan servicer to discuss what to do.

Getting student loans might seem intimidating, but it’s not unusual and it can help pave the way to success in your future. Education is a solid investment that can reward you for a lifetime. And student loans can be invaluable seed money to get you started!

Read more about our Smart Option Student Loan here.