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  1. Student Loans: Introduction
  2. Student Loans: What Can You Afford to Borrow?
  3. Student Loans: How Federal Student Loans Work
  4. Student Loans: Private Loans
  5. Student Loans: How Student Loan Repayment Works
  6. Student Loans: Paying Off Your Debt Faster
  7. Student Loans: How Federal Student Loan Consolidation Works
  8. Student Loans: Private Loan Consolidation
  9. Student Loans: Conclusion

Let's recap what we've learned about student loans:

Without student loans, many young adults wouldn’t have the financial means to attend college. Without a college degree, they might have a lower lifetime earning potential and a less satisfying career.

But understanding the reality of student loans before you borrow is imperative. A 2013 survey by the One Wisconsin Institute, a nonprofit statewide research and education organization, found that the average time to repay student loans was 21.1 years. Out of this average, those with advanced degrees generally reported longer repayment periods (23 years) than those with just a bachelor’s degree (19.7 years. Those with student loan debt were less likely to be homeowners.

The average monthly student loan payment was $499 for those with a bachelor’s degree and $653 for those with graduate or professional degrees. Only 9% of those with bachelor’s degrees who had borrowed said they had paid off their student loans (the survey respondents were last enrolled in 1997 or later). 

If you are going to borrow for college, here are 6 key questions you should be able to answer after reading this tutorial and doing some research specific to your situation.

1. What can I really afford? How much you borrow should not only be based on how much the school you want to attend costs; it should also be based on how much you can afford. Figuring out how much you can afford requires calculating your current non-loan resources, researching potential salaries in fields you’re considering, and researching potential expenses in places you might live.

2. Is borrowing for college worth it? Which school you want to attend, which subject you want to major in and which field you plan to work in after graduation all affect how much money it makes sense to spend on school. If you want to major in psychology at an expensive, but unprestigious, small liberal arts college, borrowing is unlikely to pay off. If you’re majoring in a STEM field at MIT or CalTech, it might be worth it. If you don’t know what you want to do yet, get an inexpensive undergraduate education at an affordable in-state school; you can always pursue a prestigious graduate degree if it makes sense later.

3. Should I take out federal loans, private loans, or both? Federal student loans have many benefits: no credit check; low, fixed interest rates; grace periods after graduation; mandatory deferment and forbearance, sometimes without interest, during periods of financial hardship; forgiveness upon death or permanent disability; public service loan forgiveness; teacher loan forgiveness; and income-driven repayment plans. However, federal loans may not provide all the money you need for college, in which case you may have to supplement them with private loans or choose a less expensive school.

4. When do I have to start repaying my student loans, and how long will it take to repay them in full? Know if your loans have in-school deferment or a grace period and what happens to your loan interest during those times. Will you have income from work during the school year or over the summer to make payments toward your loans while in school? What repayment period is your lender offering, and can you anticipate having enough disposable income to repay your loans sooner?

5. What will happen if I can’t make my student loan payments? Know whether the lenders you’re considering offer deferment or forbearance during financial hardship, how to qualify and how long these allowances last. Also research what will happen to the interest on your loans during deferment or forbearance. If you’re considering asking a parent to cosign, make sure you both understand how any inability to pay on your part will affect their finances and credit.

6. Should I consolidate my loans? Federal student loan consolidation simplifies the logistics of repaying multiple loans by turning them into a single loan, but it may not save you money in the long run. Private student loan consolidation is really just refinancing, and it can be done with federal or private student loans. Refinancing can lower your interest rate, but if any of the loans you’re refinancing are federal ones, you must be comfortable with losing the special protections they offer.

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