Risks and responsibilities of student loans

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If you do decide to take out a loan, make sure you understand who is granting the loan and the terms and conditions of the loan. Student loans can come from the federal government, private sources such as a bank or financial institution, or other organizations. Loans made by the federal government, called federal student loans, generally have more advantages than loans from banks or other private sources. Learn more about the differences between federal and private student loans. Before taking out a loan, it is important to understand that a loan is a legal obligation that requires you to repay the amount you borrow with interest. Even if you don’t have to start paying off your federal student loans right away, you shouldn’t wait to understand your responsibilities as a borrower.

The federal student loan program of the United States Department of Education is the federal direct loans program (direct loans) of William D. Ford. For this program, the US Department of Education is your lender.

Four types of direct loans

Direct subsidized loans are loans made to qualifying undergraduate students who demonstrate a financial need to help cover the costs of graduate studies at a college or vocational school.

Direct unsubsidized loans are loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need.

Direct PLUS loans are loans made to graduate or professional students and dependent parents of undergraduate students to help pay for education expenses not covered by other financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to be eligible.

Direct Consolidation Loans allow you to combine all of your eligible federal student loans into one loan with one loan manager.

How to Avoid Debt: Be a Responsible Borrower

Keep track of how much you are borrowing. Think about how your loan amount will affect your future finances and how much you can afford to repay. Your student loan payments should only be a small percentage of your salary after you graduate, so it’s important not to borrow more than you need for your school expenses.

Look for starting salaries in your field. Ask your school for the starting salaries of recent graduates in your field of study to get an idea of ​​how much you are likely to earn after graduation. You can also use the US Department of Labor’s Occupational Outlook Handbook or the Career Search Tool to search for careers and salaries.

Understand the terms of your loan and keep copies of your loan documents. When you sign your promissory note, you agree to repay the loan according to the terms of the note, even if you do not complete your education, cannot find a job after completing the program, or dislike the l education you received.

Make payments on time. You are responsible for making payments on time even if you do not receive an invoice, refund notice or reminder. You must pay the full amount required by your repayment plan because partial payments do not meet your obligation to repay your student loan on time.

Keep in touch with your loan manager. Notify your loan manager when you graduate; withdraw from school; go below half-time status; transfer to another school; or change your name, address or social security number. You should also contact your agent if you are having difficulty making your scheduled loan payments. Your manager has several options to help you keep your loan in good standing.


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