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What are the differences between private and public student loans?
With the cost of a college education continuing to skyrocket, more students than ever depend on financial assistance to help cover their educational expenses. Financial aid is money that is available to students to help pay for attending a post-secondary institution in the United States. There are a variety of financial aid tools available to students, including grants, scholarships, need-based awards, work-study employment and student loans.
Types of student loans
Based on eligibility requirements and some limitations on the federal financial aid products, many students compliment their award package with a subsidized or unsubsidized federal student loan, both of which are offered through the U.S. Government.
Private student loans are another method students use to pay for college. These are offered through lenders, such as banks, credit unions, and companies, such as Sallie Mae, as well as through schools.
Public vs. private loans
There are substantial differences between public and private student loans, as we’ll look at here, but both are designed to help students sufficiently fund their education. As a general rule, private education loans serve as a supplement to the federal loan option.
- Federal loans offer a fixed rate that is the same for every borrower. The interest rate for a private loan varies based on an index rate plus a margin, and the margin is based on the credit rating of the borrower.
- A subsidized federal student loan doesn’t need to be paid back until after the student graduates, and the government will pay the accrued interest up to 6 months after graduation. An unsubsidized federal student loan acts the same, but the student is responsible for paying the accrued interest. Private loans, however, have a variable interest rate, so students are encouraged to repay the interest while they’re still in school.
- All federal student loans come with terms that protect the borrower if they lose their job, go back to school or experience another economic hardship. If you don’t qualify for a deferment, federal loans have an additional check, called forbearance, which can place repayment on hold due to illness or by meeting other requirements.
- Private loans do not allow borrowers to put their payments on hold. However, if you experience a hardship, you can appeal to the lender for a deferment or forbearance.
- Federal loans offer seven repayment options, including standard repayment, which satisfies the debt in 10 years, and flexible pay-as-you-earn plans that allow you make payments based on how much you earn. Private loans typically provide two repayment options, standard and extended.
- If you are disabled, go into public service or teach in some low-income areas, all or a portion of your federal loans can be forgiven or discharged. However, federal student loans are generally not dischargeable in bankruptcy. Private student loans are usually not dischargeable in bankruptcy, and the federal programs that allow you to discharge the debt when you go into public service or social work do not apply to private student debt.
2017 What’s Ne[x]t Scholarship
What will you do next?
The 2017 What’s Ne[x]t Scholarship is back and we’re excited to once again be giving away $15,000 in scholarships to THREE deserving students. Want to enter? Create a short video (5 minutes or less) telling us where life’s taking you, what your passion is, and what you want to accomplish, and you could win.
Applicants must be a Georgia’s Own member, age 25 or younger, and attending an accredited institution for the 2017-2018 school year. To find complete guidelines or to apply, please visit georgiasown.org/scholarship.
Start filming – applications are due by April 30, 2017!
Unconventional Ways to Pay Down Student Loan Debt
If there’s one contender for Understatement of the Century, it’s “student loans are a massive problem.” As of July 2016, there are 43.3 million student loan borrowers carrying $1.35 trillion worth of debt. That translates to roughly $31,178 per borrower, excluding compound interest. Yikes!
Lucky for college grads, there’s still hope. And it doesn’t require the utterly unsexy method of tightening the proverbial belt to inhuman limits. If you want to earn money, pay off your debt and have fun all at the same time, give these not-so-conventional tips a spin.
1.) Enter a Contest
Granted, there’s only a one-in-a-million chance to win one of those, and contests don’t come every day. But if means slashing a few thousand dollars off your debt, why not?
2.) Rent Your Apartment
Does your place see a lot of foot traffic from visitors? Consider renting it out. Just sign up for sites like Airbnb, Homeaway and FlipKey, and you can connect with potential renters ASAP. In case you need to stay somewhere else while you rent out your place on Airbnb, there’s a site called – and we’re not making this up – “Can I Stay with You While I Rent My Place on Airbnb ?”
Of course, there’ll be taxes on what you earn from renting out your place. But you can reduce your taxable income by factoring in expenses such as repairs and maintenance, insurance, etc. If you’re not sure which of these is tax deductible, don’t be afraid to ask a financial expert.
3.) Sell Items You Don’t Use Anymore
If your room is overflowing with unused knick-knacks, it might be a good idea to sell some things. As painful as it is to part with prized possessions, it’s even more painful to know that a debt might take a lifetime to pay off.
Start with items like jewelry, which appreciate in value over time . You can sell them via sites that deal with general goods, or you can find places that specialize in transactions for your particular item (e.g. Etsy for jewelry). Be careful when selling online, though: Do a background check on your buyer, ask for upfront payment and stay safe when selling online.
5.) Test Websites
Considering how many websites crop up every day, expect more people to want to know whether their website is working. Fortunately, most of them are willing to pay for that kind of service, and it doesn’t take a lot of technical know-how to test a website.
The only things you need are a computer with a microphone, a reliable Internet connection and five to twenty-five minutes to perform each test. Basically, your job is to download software, allow the software to record your screen as you browse the client’s website, record a voice review and get paid as much as $200 per month . Not bad for a task that simple!
6.) Turn Your Passion into Profit
What better way to make money than to do something you love? If you have a saleable skill, such as writing website copy or crafting handmade jewelry, you can advertise it via online job sites like Upwork, Guru and Crowded. Alternatively, you can build a self-hosted website, show off your work there and promote your site to attract eyeballs to it.
The Sky’s the Limit!
These aren’t the only ways to save up for student loan payments. You can also stick to the traditional methods of keeping your expenses low, paying your dues on time and maintaining a fund for the rainy days. But if there are more exciting options available, why not give those a shot, too?
Information taken from igrad.com