Student Loans
A part of many families’ college planning will be student loans. Although comprehensive college planning helps to minimize loan amounts, they still can be an important tool in paying for college.
Generally speaking, as a rule of thumb, a student should not take out more in student loans than they expect to earn in their first year after graduation. Following this rule will increase the student’s ability to repay their loan.
Broadly speaking, there are two types of student loans. There are loans provided by the federal government, and there are private loans, like those provided by banks. Different loans have different costs and structures. An advisor can help families make the best student loan decisions.
An example of a federal loan is a direct federal loan. It is also known as a Stafford Loan. These types of loans are taken out directly in the student’s name and they do not require a cosigner.
Some federal loans are subsidized. These loans are needs-based and they have the benefit that no interest accrues while the student is in school. Other federal loans are not subsidized. These loans are not needs-based, but interest accrues while the student is in school.
To apply for federal loans, a student would fill out the Free Application for Federal Student Aid.
Federal loans can often be a better option than private loans, and students and their families should consider them first. In addition, the total cost of a loan should be taken into account when making a loan decision.
In addition, because of the way loans and other sources of funding work, a family can save money by structuring how they pay for college. A CERTIFIED FINANCIAL PLANNER™ can walk families through the process so they can make the best decisions.
