What you need to know about student loans

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B. Terms and Conditions

How much can you borrow? For undergraduate students, the maximum amount of direct subsidized loans and direct unsubsidized loans is between $ 5,500 and $ 12,500 per year, depending on the school year (and addiction status). Graduate students or professional students can borrow up to $ 20,500 per year in direct unsubsidized loans. Direct loans PLUS can also be used for the remainder college tuition costs not covered by other financial aidas determined by your school.

To get a loan, you sign a master bill of exchange that lists the terms and conditions as well as your rights and obligations. The fixed interest rate is usually lower than for a private loan, and most federal loans do not require a credit check or surety. Save this document on file for information on deferred or deferred payment and when you will start repaying the loan. Repayment begins after you leave your program, or is reduced to half the time. Federal loans offer flexible repayment plans and options to defer loan payments if you problems with payment

Another option is that private loans tend to be more expensive because the rules are set by lenders — banks, credit unions, and government or government-affiliated organizations. While many require payment while in school, some allow deferrals. Their fixed or variable interest rates may be higher or lower than federal loans, and these rates may not be taxed. They are based on your creditworthiness, often require a co-author, and cannot be combined into an outright consolidation loan. But you may be able to refinance. Borrowers should inquire about repayment options, options for deferring or reducing payments, and prepayment penalties. Few lenders offer student loan forgiveness, but some loans from government agencies can be forgiven under certain circumstances.

C. Forgiveness and loan repayment

On the other hand, federal student loans offer flexible payment plans and can be forgiven, canceled or canceled for a number of reasons. Patricia D. Houseknost, a Certified Financial Planner from Long Beach, California, offers two examples: If you are hired by a government or a nonprofit organization, you can get a loan forgiveness under the Public Service Loan Forgiveness (PSLF). Program. “PSLF forgives the balance of your direct loans after you have made 120 qualifying monthly payments under the applicable repayment plan while working full time for a suitable employer.”

In addition, if you teach full-time for five full and consecutive academic years in a primary, high school, or low-income educational institution, you may be eligible for a forgiveness of up to $ 17,500 on a direct loan. “And if your school closes at the time of your enrollment or shortly after you drop out, you may be eligible for a federal student loan repayment,” she says.

When it’s time to pay, you can apply for an Income-Based Repayment (IDR) plan with payments based on your income. If you qualify, you will be notified of your eligibility and the amount to pay. While this is an attractive option, there are four similar IDR plans with different qualifications, which can be confusing, warns Belle Oswat, CFP and Certified Student Loan Officer (CSLP) at VLP Financial Advisors in Vienna, Virginia. “In addition, the percentage of your income that you have to pay varies depending on the repayment plan, and each plan differs in how the interest is subsidized and / or capitalized,” says Oswat. It is also important how these plans calculate your income. “Some require your spouse’s income to be included if you file a joint tax return. But some don’t, which can significantly lower your payment. “

Note to yourself: By signing the principal bill, you agree to repay the loan in accordance with the terms of the bill — even if you drop out of school, you don’t like your education, or you don’t get a promotion. , a new job or change the career of your dreams.

Patricia Amend has been a lifestyle writer and editor for 30 years. She was a staff writer at Inc. magazine; reporter for the Fidelity Publishing Group; and senior editor at Published Image, a financial education company that was acquired by Standard & Poor’s.

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