Demand for student loans in the US has never been as high as today, with almost 69% of newly graduates finishing college with an average of $30,000 of debt. It is keen for any aspirant student to understand the responsibility and the burden that a student loan may have on their future life and their career.
On essence Student Loans should act as an invisible hand opening doors for you, helping you achieve your goals of higher education and also becoming a professional with a more desirable career. While this is the basic principle behind them, it is important to mention that certain providers have taken advantage of the demand in order to hike the rates and offer payment plans with dubious intentions.
Keep in mind that as an aspiring student the most important decisions that you will make will be choosing a college, a major and also how you will pay for your education. Choosing the wrong provider can have strong repercussions on your life and also on your career. It is important for anyone interested in getting a student loan to take their time and to pontificate in order to get the best possible option.
Types of Student Loans (Federal & Private)
Even though there are many different types of Student Loans available in 2019, all of them can fall into two main categories, Federal Loans, and Private Loans. It is key for individuals to understand the differences between a government-sponsored program and a fully private service. Keep in mind that the average length for full repayment of student loans in the US takes between 15 and 18 years after graduation, it is imperative to plan in order to choose the best possible plan.
Choosing the right provider and loan type are desitions that will follow you for a considerable part of your professional career and your life. Take your time to evaluate all your options before embarking into a Student Loan.
Generally speaking, many individuals believe that dealing with a government loan would be better than dealing with a financial institution. While on paper this is the case as federal plans offer their own type of benefits, in reality, federal loans have changed in the past decade and many individuals are having problems with them. The reason behind the problem is not the loan type or their laws, but the provider that is acting on behalf of the government in order to offer them to the public.
Please note that in order to apply for student aid or a Loan you will have to submit your FAFSA (Free Application for Federal Student Aid) application every year, this will allow you to check your eligibility for a Federal Student Loan. What many people don’t know is that depending on your School and your State, the government may automatically assign you to a provider who will oversee your account.
If you are aiming for a traditional Federal Loan instead of a private, please take your time to understand your options and also to review your assigned provider in cases where it was not selectable.
Federal Loans are usually divided between Subsidized and Unsubsidized, this means that while you are a student the government will take care of the interests, and you will only start paying for the entire loan once you graduate.
Please note that subsidized loans will require the student to be eligible based on family income and necessity for financial aid. On the other hand, unsubsidized loans are available for any individual regardless of financial need.
Private loans are offered by many stable and well known financial institutions, as a private product they respect the laws of Student Loans and the guidelines of the government but they also follow in most cases a proprietary model that will vary from institution to institution.
Keep in mind that just like a federal loan you can still apply to subsidized loans where the government will cover your interests while you finish your education.
From a pricing perspective, federal loans are usually cheaper than private offering, but the latter will offer a more flexible and nimble service. Once you understand the big picture of how much money you need to borrow in order to successfully afford education, you will be able to make the conjectures to determine which type will actually be better for you.
Since you can have both types of loans, it is openly recommended for individuals to take advantage of the free offering from federal loans first and then to borrow any outstanding money with a reputable financial institution as a private student loan.
Pros and Cons of Getting a Student Loan
Getting in debt with the intention of paying for education is one of the noblest reasons anyone should get a loan for. Keep in mind that just like with any other thing in life, Student Loans are not a rose color, they have their own negative and they can be tricky to understand. Knowledge is power, inform yourself the most in order to avoid dealing with tiring situations down the road.
- Access to afford Education: It is fairly common to see individuals bailing out on their dreams of attending college and becoming professionals simply because they can’t afford tuition, you might finish your career with debt that needs to be paid but it will allow you to successfully follow your dreams to get a higher education.
- Attending a better college: For many individuals getting a student loan can mean the difference between their dreamed major and settling down for what they can actually afford. While being out of debt is a blessing, it is important to keep in mind that studying what truly drives you will make the entire college experience better. You should not be aiming to simply get a degree, but to get a degree that goes along with your personality, your life expectations and also your personal goals and beliefs. Before making a decision of what you can afford, take your time to evaluate your options, chances are you will be surprised by what you can get.
- Paying other Expense: Besides paying for tuition student loans can be used to cover other expenses related to your education like accommodation, board and even supplies of certain careers. Keep in mind that you should aim to be comfortable during your college years, not to splurge your money but to focus on your education instead of having to pull every penny in order to make ends meet. The best advice I can give you is to try to borrow the least possible without having to sacrifice the quality of your education.
- Credit Score: It is relatively common to see individuals building their credit scores straight out of their student loans. Many individuals have never had anything under their names before going to college, if you are responsible with your payments, having a students loan will help build and boost your credit score.
- Expensive: You would be surprised by how high the rates can be for certain student loans, choosing the wrong plan can let you paying interests that would make you want to go back in time and pay your loans with a credit card instead! As mentioned before, you should take your time to review all your options, including analyzing if you would be better with a high fixed rate or a floating rate for your line.
- Starting a career with Debt: Starting a career and a life with a burden of being in debt can be pretty hard if you don’t get a job or if you don’t earn as much as you thought you would. It is critical for aspiring borrowers to understand how much can they really pay and to not overextend their loans beyond what they truly need.
- Personal goals might have to wait: Having a Student Loan will force you to re-evaluate your decisions after graduation. In order to avoid any bad surprises down the road, it is important for individuals to understand the sacrifices they will encounter later in their life. Managing your expectations is the best way to ensure you won’t have to deal with any disappointment when the time of repaying comes.
- Bankruptcy won’t help you: There is nothing more loyal in life than a student loan. If you ever wonder who would follow you to the end of the world and back then look no more! Sarcasm aside keeps in mind that the chances of getting rid of your loan without paying it in full are very slim. Even if you could get an attorney to present a case and filed for chapter 7 or 13 of the Bankruptcy Act, the chances of winning are really really tight.
- Credit Score Destroyer: Just like they can act as levers to build a great credit score, Student Loans can also become in your worst enemy since in most credit scores scenarios they have a higher weight than traditional debt. You would be surprised by how devastating defaulting on student loans can result in someone’s credit score. I won’t say that you should sacrifice your lifestyle or your overall life to pay for a loan but keep in mind of the repercussions it might have on you and your options in the long term.
- Crooked Providers: Over the last decade we’ve seen an incredibly fast risen in the amount of student debt owed by Americans. As the level of debt continues to rise even higher, the eyes of many regulators have fallen into a group of service providers who have been known for churning their clients in the past! Some of these companies have even been accused of committing fraud against their users and it won’t require much research to find open cases online.
When it comes to student loans you will find individuals who are grateful of being able to study what they truly wanted and that they are comfortable paying their loans, but you will also find the ones that have had to deal with either external factors or simply bad luck with their providers and their careers.
The best advice I can provide anyone interested in a student loan is to be prepared and aware of the commitment they will be taken with the loan. Take your proper time to analyze meticulously any plan and provider before signing the contract, the more prepare you are, the easier it will be down the road.
We live in an online world where reviews can be found on everything, be sure to do your due research before choosing a provider. Don let yourself be lured by deals that are too good to be true!
Best Student Loan Options of 2019
1. Sallie Mae – Best For Flexibility
Sallie Mae is the largest private provider of student loans in the US, with over $180 billion in managed debt and 10 million borrowers. When you start analyzing the numbers it becomes easy to see how big this company really is. The firm started in the early 1970s as a provider for federal loans, it was not until six years ago when the firm drifted towards private offering.
If you ever got a Federal Loan from Sallie Mae, it is very probable that it is now being managed by the new group of federal providers like NAVIENT.
The firm is a great provider mainly because of all their experience and proven track record, but also because of how flexible they can be when it comes to requesting a loan or repaying for it. This is one of the only firms from this list where I can actually say their best interest is to help individuals and also to help them repay for their loans. This is one of the only companies I’ve seen where they don’t see students as dollar symbols with zeroes to their right ($ 000,000).
- Fixed: 5.74 to 11.85% (undergrads)
- Variable: 3.62% to 10.54%(undergrads)
Loan Amount: $1,000 up to 100% of the cost of education and attendance. The firm actively encourages students to focus on their education and to borrow what they need in order to secure taking the most advantage of their time in college. The main idea behind this is to avoid any additional stress of the students having to worry about their expenses and how to afford them while studying.
Length: In order to calculate the length of the loan it is important to take into consideration how long is it going to take for the student to actually graduate, after that a mutually arranged payment schedule will be created. The reason for this is to give students the opportunity to make repayments as flexible as possible. If you are lucky enough to find a six figures job after graduation and you want to pay your loans early you can do it. On the other hand, maybe paying only the interests is your goal right now as you haven’t found the right job, in any case, the point is that flexibility is offered to you.
2. College Ave – Best For Debt Refinancing
College AVE is a fairly new company with less than five years of active operations. The firm was established by a group of executives from Sallie Mae, the organization might not be old but their Sr Management is composed of some of the most experienced professionals of the Studen Loan Market.
It is important to mention that the company did not become famous for its loans per se, but for the refinancing options. Depending on your financial situation it can be smart to aim for a refinancing method when you consider that you could be paying less every month or simply save money by repaying it early.
There are many different reasons that can take an individual to become interested in refinancing their debt, whatever your reasons are you should consider taking a look at the flexibility offered by College AVE. Keep in mind that not many companies will allow you to refinance at a loan with a shorter tenure, if this is what you are looking for then College AVE might be your best option.
- Fixed: 4.74% – 12.78% (undergrads)
- Variable: 3.99% – 11.32% (undergrads)
Loan Amount: $1,000 to $80,000
Length: 5-15 years. Please keep in mind that depending on the case a loan can take considerably longer to be repaid.
3. Discover – Individuals with High Credit Score
It is very possible that if you are in the US, you might have used Discover for their credit cards, ATMs or simply because of their broad payment network. But, the company is more than a plastic cards provider, over the past decade, the company has ventured into other areas and services like online banking and lending.
One of the best reasons to deal with Discover for your student loans is that you will be borrowing from a well known and stable company, the overall service you will receive will be more transparent than with most dedicated Student Loan Lenders. Keep in mind that Discover is not in the business to destroy their reputation for ripping off students with unpayable programs and churning practices, instead, it is a company interested in offering a full suite of services while taking care of their clients.
The only drawback I find with Discover is that in order to apply for a Students Loan you will need to have a great credit score and a cosigner. If you don’t have the right record and score, it is likely that your request will be rejected.
- Fixed: 6.49% – 11.99% (undergrads)
- Variable: 4.99% – 11.24% (undergrads)
Loan Amount: With Discover, you will be able to borrow the 100% of the school certified expenses (tuition, living, miscellaneous expenses)
Length: 15 years
4. LendKey – Best For Quoting with Smaller Banks
LendKey is probably the most different option from this list. The company was initially created with the intention of acting as a P2P lending platform for student loans but later changed their business model into a platform that would allow individuals to receive quotes and information of multiple types of loans and providers. The company became publicly known in the US for their efforts to offer attractive lending packages with the liquidity and execution of more than 13,000 community banks and financial institutions all over the country.
The firm might be offering a completely different product with its own approach, but it is important to keep in mind that it works incredibly well. Take your time to review their app and their platform, it is very easy to use and besides, receiving quotes from thousands of financial institutions has never this easy. At the end of the day, the companies interest is to deliver the best possible option for your loan, it is great to see that there are still companies interested in the well being of their clients.
- Fixed: 3.64% – 7.5 (undergrads)
- Variable: 2.49% – 7.41 (undergrads)
Loan Amount: $7,500 to $125,000
Length: Up to 10 years for repayment
5. Lendedu – Best Marketplace
Lendedu is another fintech company offering its own marketplace where individuals can search for their best options in terms of student loans, refinancing and even credit cards consolidation. With a similar approach to what LendKey is currently offering, Lendedu is an overall more complete option as it also allows to quote refinancing of other types of loans as a whole.
It is worth mentioning that the firm currently operates with the leader student loan providers in the US, this usually allows for requests to be smooth and agile.
Disregarding where you are living, I actively advise to take your time and to review all available options. Reviewing pricing in terms of rates and benefits with these two market places is pretty straightforward. You would be surprised by how much rates can defer between community banks and bigger financial institutions.
- Fixed: 3.64% – 7.5 (undergrads)
- Variable: 2.49% – 7.41 (undergrads)
- Technical Trading
- Parents Loan for their Children
Loan Amount: Min $5,oo0 to No Max. Please keep in mind that the firm allows you to borrow as much as you can but as mentioned before this is something you should be worried about. Without sacrificing your education it is advised to try to borrow the least possible and only when truly necessary.
Length: Up to 20 years for repayment
6. Ascent – Best For Individuals with no Credit Score
Ascent offers a traditional lending service, but at the same time, the company makes a great effort in order to emphasize that all their services are design with the intention of expanding possibilities and not to restrain they, clients, as many other providers do.
There are many reasons why an individual would be interested in borrowing from Ascent, but the principal would be if they have a solid cosigner. This is partly because they will offer a very competitive rate and they will weight the credit risk on your cosigner and not on you.
Besides offering an incredibly competitive rate, the firm also offers access to a high level of flexibility when it comes to repayment. One aspect I believe that more individuals should take into consideration is that life is not linear, and we can’t forecast everything that might happen. Chances are you have been planning on getting a job straight out of college, but in reality, it could take you more than the buffer of six months to do so. Maybe you got fired and you can’t afford the payments, being able to take advantage of a nimble plan can save you a lot of money, emotional pain and also keep your credit score untouched.
- Fixed: 4.98% – 14.16% (undergrads)
- Variable: 4.23% – 13.23 (undergrads)
- Deferred Repayment
- $25 Minimum Payment
Loan Amount: $2,oo0 to $200,000
Length: Up to 15 years for repayment
The steady rise of student debt in the US and also the increase in their rates have made the sector part of a very active political discussion in congress and the Senate. What was intended to be used in order to open doors for individuals that otherwise would not be able to receive a higher education, has turned into a money making machine for some corporates who profit from churning their clients.
With almost 69% of new graduates using student loans in order to pay for their education, it is easy to see how big the market and its demand really is. Luckily for applicants, the market is offering an equally large offering of loans and providers. If you do your proper research, it is probable you will be able to find the right plan that will help you go achieve your education dreams without sacrificing your personal life and also your professional career.
Even though Studen Loans are seen by many as a necessary evil, I personally believe that if you pontificate properly your loan and you use a well-known provider, you won’t have to deal with any type of drama or sketchy situations down the road.
Student loans can be requested at any time during the year, having said so keep in mind that you will be eligible to request a loan during the year as long as you submitted your FAFSA form on time.
Please be aware that any submission of a FAFSA form should have been sent before Jun 30 (there will be a 15 days window for any adjustment or updates if needed).
A student loan is one of the only situations where you can aim to borrow money without having a credit score or having a really bad one.
While not all SL providers will allow this to happen, it is known that Federal Direct Student Loans will offer access to individuals in this type of situation.
Many students start feeling anxious just before graduation time because it is finally when the debt burden starts kicking in.
Please be aware that there is a buffer of time between graduation time and the first payment date. On average, most student loans providers (federal and private) will allow for a grace time of 6 months before the first payment runs out.
Note that depending on your situation this can be extended for even longer.
There are two principal mechanisms that an individual can use in moments of crisis in order to postpone their payments on a student loan, one of them is “Forbearance“.
Forbearance is not automatically granted and it usually has to go through approval from the lender side. In synthesis, you would be allowed to stop the payments without it affecting your credit score. Keep in mind that even though payments might be stopped, interests are still accruing and will continue running like it’s business as usual.
The other method is “Deferment“, keep in mind that you can apply for if you fall into one or more of the following scenarios:
- You are unemployed or working less than 30 hours a week and you are looking for a fulltime work
- Proven financial crisis
- Actively service in the US Military during a war or during a National Emergency
- Actively service PeaceCorps
- You went back to school and you are currently enrolled at least half time
While you can still be rejected for a forbearance request if you meet the requirements for a deferment you cannot be rejected.
The PSLF program allows individuals to apply for forgiveness of their debt after paying back 120 monthly payments while working for a qualifying employer.
The list of jobs that are eligible is pretty broad, but in the end, it will depend on who your employer is.
It is super important to understand that only direct federal loans are applicable to this program.
After the payments start accumulating the loan will be considered under the category of delinquency. It won’t be until after nine months that the entire account will be considered in default. Keep in mind that not only you will be killing your credit score with the default, but you will also be exposing yourself to further punishment as the government will be allowed to seize tax refunds and also garnish from your wages directly, without a judges order.
The worst part of falling into a default category will be dealing with collecting agencies and their incredibly large and expensive fees. I can easily understand and imagine scenarios where not being able to pay a Student Loan might be the only way for an individual to cover their main needs, but it is also keen to keep in mind there are other options to avoid getting to this point.
Keep in mind that under most scenarios, both federal and private providers should allow you to take forbearance or deferment for a determined period of time. Remember that once you fall into default you will automatically lose any rights to get a more fair agreement. If possible try to manage it in a way you will stay out of default, even if it means taking an extra method like the ones mentioned above.