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Posted by on Mar 13, 2017 in College 101, Financial Aid, Money For College | 0 comments

Understand what you’re borrowing: college loans explained

Understand what you’re borrowing: college loans explained

Smart college loans choices today equals financial freedom tomorrowCollege loans are one option for financial aid, and if used properly, they can be a practical alternative for students whose scholarships, grants or savings do not cover their full tuition costs. In fact, two-thirds of students currently have student loans, and the average yearly student loan debt is $7841. So it is important to understand which kinds of loans you are taking and how much you are borrowing.

Two types of college loans


Private loans are funded by banks or other lenders, who have the freedom of setting the interest rates, loan limits, terms and conditions. Private loans also have less flexible repayment options compared to federal loans. Most colleges accept private college loans. For more information on private loans, please seek advising from a financial aid advisor.


Federal loans are offered to eligible students who submitted a Free Application For Student Aid (FAFSA). Make filling out your FAFSA application easy by reading up on how to De-mystify your FAFSA. Federal loans have some good perks: Some federal loans will not accrue interest while a student is in school. There are flexible repayment options which are based on income, and there are some loan forgiveness programs for borrowers who make public service their career.

Subsidized vs. unsubsidized college loans

Federal loans are either subsidized or unsubsidized. It is important for you to know the difference before borrowing either.

Subsidized loans are a type of college loan that you are 100 percent liable to pay back. However, the U.S. Department of Education will typically pay for all of your interest if you are enrolled at least half-time.

Unsubsidized loans are a type of college loan that you are liable for, but the borrower is also responsible for all accumulated interest while in school at least half-time at an interest rate of 3.76% for undergraduate students.

If you make smart loan choices today, you can have financial freedom tomorrow.

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