Going to college is an exciting time, starting a new career path and meeting new people. Until you realize the costs and long-term debt that can accumulate. Not to mention the costs of textbooks, computer fees, and food if you’re dorming. Most people have some idea of what a student loan is based on the name. While it does involve debt, the terms and conditions are specified.
A student loan is borrowed money that pays for the cost of college and is repaid over time. Besides paying the amount of money owed, you will pay a fee called interest. The interest is usually charged once a month based on the unpaid balance of the loan. Most student loans have fixed interest rates which stay the same over time. However, a variable interest rate can change every month or quarter.
Federal Loans –
Federal loans or federal student financial aid involves filling out a FAFSA form. The U.S. Department of Education awards around $120 billion in federal loans and grants to college students who apply. The easiest way to file your FAFSA is to fill it out online. This form requires social security numbers, driver’s license, previous tax returns, bank statements, and investments.
Private Loans –
Private loans or alternative loans can supplement federal financial aid. To borrow from a private lender, the student needs to have already used up their Pell Grant money. In addition to borrowing the maximum federal Perkins and Stafford loans. Unlike federal loans, private loans change with the economy. They usually have higher interest rates but lenders can lower the rates.
How Do You Apply For A Student Loan?
If you’re looking to apply for federal student loans, then you need to fill out a FAFSA (Free Application for Federal Student Aid) form. Most students don’t have a long enough credit history to apply for student loans. Instead, they must apply with a cosigner who is equally responsible for the debt and a background check is performed. In most cases, this is the parent of the child. Once approved the loan money is sent to the college financial aid office. Then the money is put toward college tuition and other fees.
Average Student Loan Debt
Most college graduates have one thing in common, student loan debt. As of 2018, student loan debt is the second highest consumer debt, behind mortgage debt. Mortgage debt can often lead to filing for bankruptcy.
Student Loan Statistics (Forbes):
Total Student Loan Debt: $1.52 trillion
Student Loan Delinquency Or Default Rate: 10.7% (90+ days delinquent)
Total Increase In Student Loan Debt In Most Recent Quarter:$29 billion
New Delinquent Balances (30+ days): $32.6 billion
How Student Loans Affect Your Life
The majority of college students have to borrow some amount of money to pay for college. Most government grants don’t completely cover the cost of college. With the costs of colleges rising every year, the need for student loans will increase as well. Currently, there are around $100 billion in new students loans every year and roughly $1 trillion in student loan debt in total. A major burden on people financially and emotionally.
Debt Stress Syndrome
A condition named by doctors that can lead to mental, emotional and physical problems. As the name suggests, this is for a person whose life is falling apart from the amount of stress they have. Knowing you have large amounts of debts makes it difficult to focus on other aspects of life. Leading them to withdraw from family and friends, and neverending worry about the money owed. If a person is struggling with debilitating debt, they need to talk to someone. Whether a friend or even a doctor. People who are not in debt cannot underestimate the effects it can have on a persons life.