{"id":2308,"date":"2024-12-23T15:50:29","date_gmt":"2024-12-23T22:50:29","guid":{"rendered":"https:\/\/iccu.lndo.site\/blog\/uncategorized\/understanding-student-loans\/"},"modified":"2024-12-30T17:41:21","modified_gmt":"2024-12-31T00:41:21","slug":"understanding-student-loans","status":"publish","type":"post","link":"https:\/\/www.iccu.com\/blog\/financial-education\/understanding-student-loans\/","title":{"rendered":"Student Loan Basics: 3 Loan Types You Need to Know"},"content":{"rendered":"\n

For one in three college students<\/a>, earning a higher education means walking off that stage with a diploma \u2026 and student loan debt. If a student loan is in your future, that might feel like a daunting statistic, but it doesn\u2019t have to be. Like most forms of debt, a student loan may be a good choice \u2014 helping you get ahead in your career and access higher wages \u2014 so long as you do your research and find a loan and repayment strategy that fits you.<\/p>\n\n\n\n

So let\u2019s start with the basics. Most student loans fall into one of three categories: subsidized, unsubsidized, and private.<\/strong> By knowing each type\u2019s structure, pros and cons, and eligibility requirements, you\u2019re setting yourself up for future success.<\/p>\n\n\n\n

\"An<\/figure>\n\n\n\n

Subsidized Loans<\/h2>\n\n\n\n

Offered by:<\/mark><\/strong> the federal government<\/p>\n\n\n\n

Pros:<\/mark><\/strong> These loans don\u2019t build interest until six months after you graduate.<\/p>\n\n\n\n

Cons:<\/mark><\/strong> Eligibility requirements are stricter, often based on financial need.<\/p>\n\n\n\n

For most loans, including auto and home, your interest accrues as soon as you get it. Subsidized loans are different. Because they\u2019re generally given to people who have a strong financial need, the government pays your interest until six months after you graduate \u2014 otherwise known as a grace period. After that, you\u2019re expected to start making monthly payments.<\/p>\n\n\n\n

Subsidized loans are available for 150% of the length of your program\/degree. For example, if you enrolled in a four-year program, you\u2019d be eligible to receive subsidized loans for six years. If you enrolled in a two-year program, you\u2019d be eligible to receive subsidized loans for four years.<\/p>\n\n\n\n

If you see that you\u2019re eligible for subsidized loans, you should generally choose these before taking out other types of loans, which offer fewer benefits. See if you\u2019re eligible by visiting studentaid.gov<\/a>.<\/p>\n\n\n\n

Unsubsidized Loans<\/h2>\n\n\n\n

Offered by:<\/strong> <\/mark>the federal government<\/p>\n\n\n\n

Pros:<\/strong> <\/mark>These loans are available to many borrowers. If you don\u2019t qualify for subsidized loans because of your (or your parents\u2019) finances, you\u2019ll likely qualify for unsubsidized loans.<\/p>\n\n\n\n

Cons:<\/mark> <\/strong>Interest accrues while you\u2019re in school. They typically have higher interest rates than subsidized ones.<\/p>\n\n\n\n

When you take out an unsubsidized loan, you\u2019re taking out a loan with fewer perks than a subsidized one. Starting the first day of disbursement, aka the day you receive your funds, your loan accrues interest. <\/p>\n\n\n\n

Like a subsidized loan, you\u2019re not expected to start paying until your grace period ends six months after you graduate. Unlike a subsidized loan, you\u2019ll probably graduate with a higher loan balance because your interest has been building while you\u2019ve been in school.<\/p>\n\n\n\n

If you take out an unsubsidized loan, set yourself up for success by paying off as much as you can \u2013 before the grace period even begins, if possible. By getting ahead of your interest, you\u2019ll owe less in the long run.<\/p>\n\n\n\n

See if you\u2019re eligible for unsubsidized loans by visiting studentaid.gov<\/a>.<\/p>\n\n\n\n

Private Student Loans<\/h2>\n\n\n\n

Offered by: <\/mark><\/strong>Private organizations like banks, credit unions, and online lenders
Pros: <\/mark><\/strong>These loans are great for people who don\u2019t qualify for federal loans (subsidized and unsubsidized) or if you need more money than what the government has offered you.<\/p>\n\n\n\n

Cons: <\/mark><\/strong>These tend to be more expensive than federal loans overall, though it depends on your circumstances and repayment options. You may be expected to make payments while you\u2019re still in college, as many private loans don\u2019t offer grace periods.<\/p>\n\n\n\n

Private student loans operate more like a regular loan than a federal student loan. Like home, auto, and other loans, private loans come in all shapes and sizes:<\/p>\n\n\n\n