Most families are now taking, or at least considering, loan amounts for students each year, or even each semester, for a 4- to 8-year period while their student earns a degree. And unfortunately, most parents and students bury their heads in the sand whenever it comes to thinking about the total amounts borrowed and what that means for repayment later on. Students have probably all about forgotten their loans actually need to be paid back, until that first statement comes in the mail a few months after graduation.

Because it’s the season again when everyone is thinking about loans and paying their next college bill, I wanted to provide more insight on the types of student loans available, and how to organize them when you consider the long-term.

  • There are essentially 2 types of loans available:
    • Federal Direct Loans
    • Private (Student) Loans

Loan terminology can be so confusing, but it’s probably nice to know that your loan type almost certainly falls into one of these two categories.

Students may have received Stafford, SUB/UNSUB, Parent PLUS, Grad PLUS, or loans directly from their college, but these are all forms of Federal Direct Loans.

On the other hand, you may have used a Sallie Mae SMART loan, a HELOC, Wells Fargo, or Discover Student Loan, but these are all considered private student loans. Some students may be lucky enough to receive a good ole’ fashioned loan from “Auntie Em”, or their parents through other accounts, but we’ll also consider these personal loans as part of the private loan category.

Not every student is necessarily eligible for each of these loans, but what gives them their unique names are the loan limits (amount), terms (like interest rate), and process for re-payment.

  • Organizing Your Loans:
    • Know the types and lenders
    • Consider amounts for borrowing totals and budgeting payments
    • Have a Re-payment plan

The bottom line is to keep up with what kinds of loans you’re borrowing, and from where, so you can more effectively manage them when it comes time to pay them back. There is an FSA (Federal Student Aid) site that keeps track of your federal loans accruing while you’re in school: Become familiar with your loan terms and lenders before your first bill is due, or before you even borrow your next loan. You can create your own similar system for any private loans you need.

This way you can be in control of your budget and be knowledgeable about payment expectations early on.

  • Considering the Long-term
    • Loan repayment
    • Should you consolidate your loans?

With several lenders and loan amounts to consider after graduation, many people feel it is just easier to pay to consolidate their student loans. While I can’t give you a definite answer for your situation (consult your College Funding Advisor!), did you know that most of your federal loans could be consolidated for free?

Chances are, your lenders will throw you into a standard repayment plan for each of your loans, that may very well all have different amounts and due dates. But you do have some power when it comes to deciding what repayment plan is best for you. One of the easiest ways is to ask your federal lender company about consolidating your Federal Direct Loans (with no added cost to you).

Consider this option first because it’s likely all of your federal student loans are being paid to the same lender company anyway. You won’t even have to think about all of those smaller, individual federal loans if your lender can send you one consolidated monthly statement.

Then, you can focus your attention on creating your best repayment plan for your private loans as well. You may not have as much freedom in your options for consolidation for private loans. But some things that should be available to you at no cost (regardless of your loan type) are: the ability to choose your due dates; and, probably, whether you pay bi-weekly, monthly, quarterly, etc.

It’s never too early to start thinking about your plan to pay for college, and today that plan will likely include loans. Get a head start and know all of your options so you don’t find yourself overwhelmed and confused at the critical time of repayment.

Until next time,

Hope Santos, College Dream Builder Finacial Aid Director

P.S. If you’re not sure how you’re going to afford college or simply want some suggestions on how to make college more affordable, schedule a call with one of our college funding experts!

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