Finance Your Education the Smart Way

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When it comes to financing the cost of your college education, student loan options can seem a little overwhelming.  Understanding interest rates, the differences between student loan types, and knowing your repayment options is the first step in taking an informed and responsible approach to making smart financial decisions for your college career!

Federal and Private Student Loans

Let’s take a quick look at two different types of loans commonly used to finance the cost of college: federal and private.

Federal student loans are just as their name describes – student loans, which are funded by the federal government.  To apply for a federal student loan, students begin by completing the Free Application for Federal Student Aid – the FAFSA.  Subsidized and unsubsidized loans are two types of federal student loans that help cover the cost of higher education.

Private student loans help supplement the gap between what is received in federal student loans, which can often be a limited amount and the actual cost of college expenses. Private loans do not involve a federal application and are offered by private lenders such as a credit union or bank.

Interest Rates and Fees

Understanding the interest rates on your loans is crucial in knowing what the “actual” cost of your loan will be over its lifetime – how much in total you will be required to repay. Interest rates can differ depending on the type of loan you have. You may see a key difference in the interest rates attached to the loans you are offered: fixed and variable. Simply put, a variable interest rate can fluctuate over time, whereas a fixed interest rate remains the same. It is always a good idea to compare the interest rates of the student loans you choose to accept – they will play a large part in determining your overall loan balance.

Be aware of any fees that may come along with your student loan. Are there application or origination fees? Most federal student loans come with loan origination fees, meaning the amount received will be less than the amount borrowed. Using a private student loan? Check with your lender to determine if there are any applicable fees.

Repayment Options

You may be able to make your loan repayments easier, and more affordable, based on the loan repayment options that are available to you. Whether you have a federal or private student loan, it’s best to work directly with your loan servicer to choose a repayment plan that works best for you.

Making sure you understand the types of student loans available to you, the terms and conditions of those loans, and your repayment options are all crucial parts of being a responsible and informed borrower.

Interested in exploring ways to pay for your college expenses in addition to federal student loans? Check out Camino Federal Credit Union Smart Option Student Loan online, which has competitive interest rates and multiple repayment options.