Guide to Student Loan Debt
Written By: Holly Johnson
Published: 7/5/2022
Read on to learn more about the different types of student loans, steps you can take to pay less for college, and how to get rid of crushing student debt after the fact.
Written By: Holly Johnson
Published: 7/5/2022
Read on to learn more about the different types of student loans, steps you can take to pay less for college, and how to get rid of crushing student debt after the fact.
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Overview
Research shows that college graduates earn hundreds of thousands of dollars more over the course of their careers, but that only tells part of the story. The fact is, those who attend college often have to rack up considerable student debt to do so, and they may spend years — and even decades — putting off other financial goals so they can keep up with the monthly payments.
In fact, data from the you have access to first. Federal student loan options can include:
Direct Subsidized Loans and Direct Unsubsidized Loans
Direct PLUS Loans (for graduate and professional students)
Direct PLUS Loans (for parents)
Since federal student loans are offered by the government, they come with extended protections you won't get with private student loans. For example, federal student loans come with fixed interest rates that are updated just once per year for the following academic year. They also help students qualify for federal deferment and forbearance programs. Federal student loans are also eligible for income-driven repayment plans, which base your monthly payment on how much you earn, as well as forgiveness programs, like Public Service Loan Forgiveness (PSLF).
By contrast, private student loans are offered through online lenders, banks, credit unions, and other financial institutions. These lenders can set their own rates and terms, and the loans they offer don't come with the same protections you get with federal student loans.
There are additional differences between these types of student loans to be aware of, including when payments are due and their eligibility requirements. The chart below highlights the main differences between federal and private student loans:
| Common Questions | Federal Student Loans | Private Student Loans |
|---|---|---|
| When are my payments due? | After you graduate, leave school, or change your enrollment status to less than half-time | During school or after you graduate |
| What type of interest rates are available? | Fixed interest rates that won't change for the life of the loan | Interest rates can be fixed or variable |
| What subsidies are available? | Some federal student loans are subsidized, meaning the federal government covers interest charges while you're still in school | Private student loans accrue interest right away |
| Is a credit check required? | No credit check for federal student loans for studentsFederal student loans for parents require a credit check | Credit check required, and you typically need good credit or a cosigner with established credit to qualify |
| What financial assistance can I receive? | Can qualify for deferment or forbearance | Rarely qualify for any deferment or forbearance programs |
| What are the prepayment penalties? | No penalty for paying your student loans off early | Varies by lender |
| What are the forgiveness options? | Can qualify for income-driven plans, PSLF, and other forgiveness plans | No access to federal repayment plans or forgiveness options |
Can Student Loans Be "Worth It?"
Is racking up student debt ever worth it? It certainly can be. Research released by the (FAFSA) every year, even if you think you won't qualify for assistance. This form helps the federal government, your state, and your school determine what financial aid you are eligible for, including federal student loans, work-study programs, grants, and more.
Apply for scholarships every year. While many college-bound students apply for scholarships before their first year of school, many lose motivation after that. According to Farrington, scholarships can be applied for and received every year of college, and not just the first. "So, don’t stop after year one," he says.
Explore tuition reimbursement programs offered by private companies. Farrington also adds that some employers offer tuition reimbursement as an employee perk. If you're unsure whether your employer offers this benefit, you can find out by checking with your human resources department.
Benefits To Choosing an Affordable Online School
Farrington points out that there's a lot of data available that can help you figure out which schools and degree programs are worth it. With that in mind, he strongly suggests researching career starting salaries, understanding the return-on-investment (ROI) of certain majors and schools, and planning accordingly.
"While college can be fun, and a great experience, it does cost money," he says. "And if you can still get the same results for significantly less money, it’s probably worth it."
Below are some sources that can help you research this information:
- . For starters, many traditional colleges and universities have an online component that awards the exact same degrees you would earn if you attended school in person. These online programs are often less expensive than their on-campus counterparts, and students can save even more by living at home, reducing or eliminating transportation costs, and continuing to work while they attend college on a schedule that works around their other obligations.
Other benefits that can arise from choosing an affordable online school include the following:
Being able to compare college tuition and fees across multiple institutions without worrying about their geographic location
Pacing options, including the opportunity to choose a self-paced degree program
Scheduling flexibility, which can include the choice between daytime or evening and weekend classes
Learning opportunities that can apply to your future career, including the use of technological advances in video conferencing, online research, and more
Learn what steps you can take to save money while in college.
Planning for Your Financial Future
If you want to maximize your college education while minimizing your costs and final student debt load, you should have a plan together before you head off to college. After all, the school you choose to attend will play the biggest role in how much you pay for higher education as well as ways you may be able to cut down on spending while you earn your degree.
Steps that can help you plan for a bright financial future include:
1
Research future salaries for your chosen career and school. Before you select a college and degree program, you'll want to know how much graduates earn once they move into the workforce. Our salary score methodology is based on alumni salary after graduation, so this is a good place to start your research.
2
into online colleges that let you pay less for the same degree. Don't pay more for a degree than you have to. Instead, look into online schools that let you work through your chosen degree program at a much lower cost.Look
3
Run the numbers to figure out how much you might have to borrow. Fill out the FAFSA to see how much financial aid you are eligible for, if any. From there, figure out how much you may need to borrow for college based on your degree type. Also remember that your first year of college will cost the least, so you should expect to pay more for tuition and fees during subsequent years.
In addition to these steps, you should also play around with a student loan calculator to see how much you'll actually owe toward the amount of student loans you will likely have. From there, you can consider other expenses you will likely need to cover (i.e. rent or mortgage, car payment, utility bills, groceries, insurance, etc.) and how your student loan payment will impact your budget.
Once you have an idea of what your bills might look like, you can see how they stack up to the salary you will likely earn after you graduate from college. Does your student debt seem reasonable in light of your future income and other expenses? If not, you may want to rethink your college plans, your chosen degree program, or both.
How To Get Rid of Student Loan Debt
While limiting how much you have to borrow for college is the best way to set yourself up for financial success, you should know that you can ditch student debt sooner rather than later.
Student Loan Forgiveness Programs
First off, it's worth noting that many student debt forgiveness programs exist, although the terms and conditions of these programs vary. There are state-based student debt forgiveness programs that forgive the debts of borrowers who agree to work in public service. Additionally, there are federal debt forgiveness programs for teachers and other types of borrowers.
Another popular student debt forgiveness program is and the you have access to first. Federal student loan options can include:
Direct Subsidized Loans and Direct Unsubsidized Loans
Direct PLUS Loans (for graduate and professional students)
Direct PLUS Loans (for parents)
Since federal student loans are offered by the government, they come with extended protections you won't get with private student loans. For example, federal student loans come with fixed interest rates that are updated just once per year for the following academic year. They also help students qualify for federal deferment and forbearance programs. Federal student loans are also eligible for income-driven repayment plans, which base your monthly payment on how much you earn, as well as forgiveness programs, like Public Service Loan Forgiveness (PSLF).
By contrast, private student loans are offered through online lenders, banks, credit unions, and other financial institutions. These lenders can set their own rates and terms, and the loans they offer don't come with the same protections you get with federal student loans.
There are additional differences between these types of student loans to be aware of, including when payments are due and their eligibility requirements. The chart below highlights the main differences between federal and private student loans:
Common Questions Federal Student Loans Private Student Loans When are my payments due? After you graduate, leave school, or change your enrollment status to less than half-time During school or after you graduate What type of interest rates are available? Fixed interest rates that won't change for the life of the loan Interest rates can be fixed or variable What subsidies are available? Some federal student loans are subsidized, meaning the federal government covers interest charges while you're still in school Private student loans accrue interest right away Is a credit check required? No credit check for federal student loans for studentsFederal student loans for parents require a credit check Credit check required, and you typically need good credit or a cosigner with established credit to qualify What financial assistance can I receive? Can qualify for deferment or forbearance Rarely qualify for any deferment or forbearance programs What are the prepayment penalties? No penalty for paying your student loans off early Varies by lender What are the forgiveness options? Can qualify for income-driven plans, PSLF, and other forgiveness plans No access to federal repayment plans or forgiveness options Can Student Loans Be "Worth It?"
Is racking up student debt ever worth it? It certainly can be. Research released by the (FAFSA) every year, even if you think you won't qualify for assistance. This form helps the federal government, your state, and your school determine what financial aid you are eligible for, including federal student loans, work-study programs, grants, and more.
Apply for scholarships every year. While many college-bound students apply for scholarships before their first year of school, many lose motivation after that. According to Farrington, scholarships can be applied for and received every year of college, and not just the first. "So, don’t stop after year one," he says.
Explore tuition reimbursement programs offered by private companies. Farrington also adds that some employers offer tuition reimbursement as an employee perk. If you're unsure whether your employer offers this benefit, you can find out by checking with your human resources department.
Benefits To Choosing an Affordable Online School
Farrington points out that there's a lot of data available that can help you figure out which schools and degree programs are worth it. With that in mind, he strongly suggests researching career starting salaries, understanding the return-on-investment (ROI) of certain majors and schools, and planning accordingly.
"While college can be fun, and a great experience, it does cost money," he says. "And if you can still get the same results for significantly less money, it’s probably worth it."
Below are some sources that can help you research this information:
- . For starters, many traditional colleges and universities have an online component that awards the exact same degrees you would earn if you attended school in person. These online programs are often less expensive than their on-campus counterparts, and students can save even more by living at home, reducing or eliminating transportation costs, and continuing to work while they attend college on a schedule that works around their other obligations.
Other benefits that can arise from choosing an affordable online school include the following:
Being able to compare college tuition and fees across multiple institutions without worrying about their geographic location
Pacing options, including the opportunity to choose a self-paced degree program
Scheduling flexibility, which can include the choice between daytime or evening and weekend classes
Learning opportunities that can apply to your future career, including the use of technological advances in video conferencing, online research, and more
Learn what steps you can take to save money while in college.
Planning for Your Financial Future
If you want to maximize your college education while minimizing your costs and final student debt load, you should have a plan together before you head off to college. After all, the school you choose to attend will play the biggest role in how much you pay for higher education as well as ways you may be able to cut down on spending while you earn your degree.
Steps that can help you plan for a bright financial future include:
1
Research future salaries for your chosen career and school. Before you select a college and degree program, you'll want to know how much graduates earn once they move into the workforce. Our salary score methodology is based on alumni salary after graduation, so this is a good place to start your research.
2
into online colleges that let you pay less for the same degree. Don't pay more for a degree than you have to. Instead, look into online schools that let you work through your chosen degree program at a much lower cost.Look
3
Run the numbers to figure out how much you might have to borrow. Fill out the FAFSA to see how much financial aid you are eligible for, if any. From there, figure out how much you may need to borrow for college based on your degree type. Also remember that your first year of college will cost the least, so you should expect to pay more for tuition and fees during subsequent years.
In addition to these steps, you should also play around with a student loan calculator to see how much you'll actually owe toward the amount of student loans you will likely have. From there, you can consider other expenses you will likely need to cover (i.e. rent or mortgage, car payment, utility bills, groceries, insurance, etc.) and how your student loan payment will impact your budget.
Once you have an idea of what your bills might look like, you can see how they stack up to the salary you will likely earn after you graduate from college. Does your student debt seem reasonable in light of your future income and other expenses? If not, you may want to rethink your college plans, your chosen degree program, or both.
How To Get Rid of Student Loan Debt
While limiting how much you have to borrow for college is the best way to set yourself up for financial success, you should know that you can ditch student debt sooner rather than later.
Student Loan Forgiveness Programs
First off, it's worth noting that many student debt forgiveness programs exist, although the terms and conditions of these programs vary. There are state-based student debt forgiveness programs that forgive the debts of borrowers who agree to work in public service. Additionally, there are federal debt forgiveness programs for teachers and other types of borrowers.
Another popular student debt forgiveness program is and the