How Do I Choose A Student Loan That Is Right For Me?
Updated on July 21, 2019
Many students make the decision to get help paying for school. These students may use loans to pay for a portion or all of their cost of schooling. Taking out a loan, as well as the loan repayment process, can seem like a daunting task. Which loan will benefit you the most is an important deciding factor in your decision-making process.
You may be wondering, “what are my options?”. When it comes to student loans, there are generally two different options. Students can choose from federal loans or private loans, each with their unique differences and benefits. Federal student loans are generally regarded as the best option. However, this may not be the case for everyone. Federal student loans usually have a fixed interest rate, meaning that what you pay on interest will never fluctuate. Subsidized loans are a type of federal student loan where the government will pay your interest while you are in school. Private student loans, in general, do not have a fixed interest rate. Your interest rate could depend on multiple factors and has the ability to fluctuate. These types of loans may be offered through private lenders, such as banks.
What are the downsides to each? Federal student loans, although a fixed interest rate, may not allow you to borrow a significant amount of money. Defaulting on your loan could mean forfeiting your tax refund. Private loans have fluctuating interest rates, which means that your payments could be difficult to predict.
What are the upsides to each? Federal student loans’ eligibility requirements are generally easy to meet and many students will qualify. Their repayment plans are regarded as being much more flexible. Private loans allow the student to borrow larger amounts. It is possible to find a private loan that has an interest rate lower than a federal loan.
Each student’s situation is different. That is why it is important to make an individualized decision when choosing a student loan. Decide what you would like out of a student loan and how dedicated you will be to paying it back on time. Finding the perfect student loan no longer has to be a daunting process.