Navigating Student Loans:
As you are planning to head off to college, one of the main things you need to understand is how to pay for your higher education. The four ways you should try and pay for college before taking out loans are scholarships, college saving plans, personal savings, and money from working. There are two kinds of loans you can apply for, subsidized and unsubsidized. Subsidized loans are when the federal government pays the interest on subsidized loans while you are in school at least part-time and during grace and deferment periods. Unsubsidized loans are for students that are enrolled for at least part-time and do not need financial aid, they are responsible for interest during all periods. There are also different ways you can repay your student loans once the grace period is up. There is the standard repayment, graduated repayment, income based repayment, the pay as you earn repayment, income contingent repayment, and income sensitive repayment. For the standard repayment plan, the payments are a fixed amount of at least $50 per month that can go on for up to 10 years. The graduated repayment plan has payments that are lower at first and then increase, usually every two years and this can go on for up to 10 years. The income based repayment plan is your maximum monthly payments that will be 15% of discretionary income, which is the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state of residence. The catch is that your payments can change as your income changes and this can continue for up to 25 years. For the pay as you earn plan, your maximum monthly payments will be 10% of discretionary income, and the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state of residence (other conditions apply). Your payments change as your income changes and this can last for up to 20 years. The income contingent repayment plan, your payments are calculated each year and are based on your adjusted gross income, family size, and the total amount of your direct loans. Your payments can change as your income changes and this can last up to 25 years. For the income sensitive repayment plan, your monthly payment is based on annual income and your payments can change as your income changes, this can last for up to 10 years.
Is This Important? Why do I Need to Know?
Learning what student loans are right for you, and learning how to repay those loans is extremely important. Everyone that goes to college is most likely going to need to take at least one student loan out. It is a good thing for everyone to learn and understand because even if you do not need a loan personally, it is good to understand how to use them to advise friends or family.
Link to Article.
http://www.nytimes.com/2013/02/10/business/college-costs-battled-a-paycheck-at-a-time.html?pagewanted=all&_r=0