Joe Arns is a freelance writer and investment professional. He earned his bachelor’s degree from the Wharton School of Business at the University of Pennsylvania. He also holds the Chartered Financial Analyst designation.
When Does an Income-Share Agreement Make Sense?
Income share agreements (ISAs), while not widespread, have crept into the financing mix for some colleges and universities, as an alternative to loans like Federal Parent PLUS loans and private education loans. ISAs may be attractive if parent borrowers are ineligible for Parent PLUS Loans and private student loans are cost prohibitive.
Refinancing with a State Education Lender
Some borrowers can lower their interest payments and simplify their finances by refinancing their federal and private student loans with a state education lender. State agencies and state chartered non-profit corporations have a funding advantage that enables them to make loans with lower interest rates than commercial lenders.
When Is a Federal Consolidation Loan a Good Idea?
Consolidating several federal student loans into a single Federal Direct Consolidation Loan may help student loan borrowers lower their monthly loan payments and simplify their finances. Consolidation also provides parent borrowers with access to income-driven repayment and loan forgiveness options. But, consolidation resets the clock on Public Service Loan Forgiveness to zero and prevents borrowers from targeting the highest-rate loans for quicker repayment.
Federal vs. Private Student Loans
Families have several options for financing college costs, including federal student loans, federal parent loans, private student loans and private parent loans. Most borrowers should look to federal loan programs first, as they typically have more favorable terms than those available from private lenders.
How to Compare Student Loans
Borrowers have a lot to consider when comparing student loan programs. In addition to the interest rate and fees paid on the loan, applicants need to determine whether a fixed or variable interest rate is the better option, and which repayment terms make the most sense for their circumstances. Lender flexibility and customer service may also be important, especially if the borrower encounters difficulty repaying the loan. Total payments should be considered in addition to monthly loan payments.
What is the Difference between Student Loan Delinquency and Default?
When a borrower fails to make payments by the due date, their student loan may be reclassified to a dreaded “d” category — delinquency or default. A student loan is delinquent if any payments are past due. If the loan installments remain past due for long enough, the student loan eventually is placed in default.
Annual and Aggregate Student Loan Limits
Annual and aggregate loan limits specify the maximum amount that may be borrowed from a student loan program per year and in total. Student loan limits vary depending on the type of loan, the student’s degree level, year in school and dependency status, the college’s cost of attendance, other aid received by the student and the loan program.
Fixed vs. Variable Interest Rate Student Loans
Student loans either have a fixed interest rate or a variable interest rate. All federal student loans carry a fixed rate for the life of the loan. Private lenders, such as banks, credit unions and other financial institutions, typically offer both fixed and variable interest rate options. Which type of interest rate is best depends on the borrower's specific circumstances.
Weird Ways to Repay Your Student Loans
As the average student loan debt balance climbs, so does the number of weird ways to repay student loans. Game shows, mobile apps, sweepstakes, and crowdfunding sites are some of the options now available to student loan borrowers. In addition, several places are offering student loan repayment assistance for those willing to pick up and move.
Move Here for Student Loan Repayment Assistance
Several states and a few towns and counties offer student loan repayment assistance for borrowers willing to relocate. The financial incentives range from about $5,000 to $50,000 or more. Most programs require four or five years of residency to receive the maximum award.
Is Givling a Good Idea for Student Loan Borrowers?
Givling is a mobile app that is part trivia contest and part crowdfunding for student loan borrowers. Participants can win a weekly cash prize by answering a series of true/false questions correctly. They may also qualify to have up to $50,000 of their student loans repaid through crowdfunding. Using the app may be a fun way to try and reduce student loan debt, but borrowers should understand their prospects for success before spending significant money.
Do You Need Good Credit to Get a Student Loan?
Student loans and parent loans are made by the federal government and by private financial institutions such as banks and credit unions. Credit underwriting criteria for federal loans depend on the type of loan. But, private lenders always require a review of the borrower’s creditworthiness before approving a loan.