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What is one benefit of privately issued student loans

What is one benefit of privately issued student loans

What is one benefit of privately issued student loans

Some companies promise to help you reduce your student loan debt for a fee. But there’s nothing those companies can do for you that you can’t do on your own for free. And some companies that promise to relieve your student loan debt are scams. It is illegal for companies to charge you before helping you. Here are some other things to know about how student loans work and how to avoid scams.

How to pay for school

There are several types of financial aid available to help you pay for your education after you finish high school. This includes grants and scholarships, federal work-study programs, and student loans. If you’re trying to determine if a financial aid offer will cover enough of your education costs to make college affordable, the CFPB’s financial aid offer search tool can help.

Grants and scholarships

Grants and scholarships give you money to study and you don’t have to pay it back. So they should be your first choice to pay for your education. The simplest way to apply for a grant is to complete a form called the Free Application for Federal Student Aid (FAFSA ® ). To find other grant and scholarship opportunities, you can also explore these other sources:

Federal Work-Study Jobs

Federal work-study jobs are another way to help pay for college. This type of employment is a needs-based subsidy that requires you to work part-time while you are in school. In order to access the work-study program, you must complete the FASFA ® form and meet the need-based criteria. You will only be paid for the hours you work. For more information, talk to your school’s financial aid office.

student loans

Student loans fall into two categories: federal loans and private loans.

Federal loans include:

Private loans , sometimes called “alternative loans,” are offered by private lenders, such as banks and credit unions. They are not backed by the federal government and do not include the benefits and protections offered by federal student loans. These loans may also require a cosigner (an endorsement from someone else who will also be responsible for repaying the loan) and a credit check (a review of your credit history).

 federal loansprivate loans
loan application
In most cases, you won’t need a co-signer or a credit check to get a federal student loan (except for PLUS loans).You may need a co-signer and a credit check. Your credit score, and the scores of your cosigners, will influence the interest rate on your loan.
Interest rates(the cost of borrowing money)Federal loan rates are usually fixed and lower than private loan rates.Private student loans may have variable interest rates.
Loan repayment termsYou won’t have to start repaying federal student loans until you graduate, drop out of school, or change your tuition hours to less than half full hours.Many private student loans require you to pay while you are still in school.
Generally, undergraduate students with financial need are eligible for a subsidized loan. The government pays the interest while you are in school with a minimum hourly load of 50% of full time.Private student loans are not subsidized. You must pay the interest on your loan.
Federal loans can be consolidated into a Direct Consolidation Loan for free. Learn more about your consolidation options .Some lenders offer options to consolidate loans, but they will usually charge you a fee.
You will not be charged if you pay off your loan faster. This is called a penalty charge or prepayment penalty.Prepayment penalty charges may apply.
If you are having trouble repaying your loan, you may be able to temporarily postpone your payments or reduce your installment amount.Private student loans may not offer you options to temporarily postpone your payments or reduce your payment amount.
There are several payment options, including options that link your monthly payment amount to your income level.Private providers are unlikely to offer payment options based on your income.
sector, you may be eligible to have a portion of your loan forgiven.A private lender is unlikely to offer a loan forgiveness program.
If you work in the public

How to apply for financial aid

FAFSA ® stands for Free Application for Federal Student Aid . It is the only way to apply for federal student aid. The application is free. Complete your FASFA ® form at fafsa.gov every year you are in college, university, or vocational school, including the year before you start college, which could be the year you graduate from high school high school.

Many states and colleges use the data from your FAFSA ® form to decide if you are eligible for state and school aid. Some private financial aid providers may also use data from your FASFA ® form to determine if you are eligible for their aid.

How to complete your FASFA ® form

When you complete your FAFSA ® form , you will also create your Federal Student Aid identification, known as an FSA ID. The FSA ID consists of a username and password that allows you to do the following:

Only you can create and use your FSA identification or FSA ID. Do not share your FSA ID with anyone, no matter who asks or what they tell you. There are dishonest people who could use your FSA ID to get into your account and steal your personal information.

How to pay your loans

Student loans are debts that you must pay back, even if you don’t finish your degree. However, depending on your situation and the types of loansyou have, you may be eligible for a different repayment plan or loan forgiveness. Some companies may contact you to say that they can work to pre-qualify you for a special government payment reduction or forgiveness program. But when it comes to qualifying for repayment and forgiveness programs, there’s nothing a private company can do for you that you can’t do for yourself for free. You don’t have to pay anything to enroll in these programs, and you can do so by calling your loan servicer, the company that handles your student loan billing, or at StudentAid.gov .

If you decide to use the services of a company to lower your payment amount, remember that it is illegal for them to charge you before helping you.

How to pay off federal student loans

If you have federal loans, the Department of Education has free programs that may help you, including:

These options are free. More information can be found at the Department of Education’s StudentAid.gov/repay website or by contacting your federal student loan servicer .

How to pay off private student loans

With private student loans, you generally have fewer options for loan forgiveness or cancellation. To explore your options, contact your lender directly. If you don’t know who your provider is, check your last billing statement.

How to avoid blackberry

Are you behind on your federal student loan payments? Here are some things you can do on your own, and for free, to get up to speed.

With private loans you can default for a few reasons. You could become delinquent if you miss three monthly payments (120 days), file for bankruptcy, or miss another loan payment. If you think you are delinquent, or at risk of becoming delinquent, contact your lender to find out what your repayment options are.

If you’re concerned that you’re about to default, carefully review your private loan contracts to better understand your rights. If you did not receive a letter from your loan servicer and believe you may be in default, contact your loan servicer immediately to discuss your repayment options and determine if default can be avoided.

loan consolidation

When you consolidate your student loans , you are combining several loans into one. You may be able to consolidate your loans to simplify your monthly payments, to extend payment terms, or to lower your interest rate. When you consolidate your loans, you get a new loan with new terms and conditions.

If all of your education loans have fixed interest rates, consolidation may not make much of a difference. If some or all of your loans have variable interest rates, consolidating them into a fixed-rate loan can save you money on the total amount of interest you’ll pay over the life of the loan.

How to consolidate your federal student loans into a Direct Consolidation Loan

Consolidating federal loans directly with the federal government is free. Some companies may offer you help consolidating your federal loans with the federal government for a fee. But you do not have to pay for this service. Consolidating your federal student loans with the federal government is a process you can do on your own. Contact your student loan servicer at no additional cost to you.

When you consolidate your federal student loans, you get a Direct Consolidation Loan. That is a loan with a fixed interest rate for the remainder of the loan term.

Before you consolidate your federal student loans, consider the type of loans you have. It may not make sense to consolidate certain loans. For example, Perkins Loans give you exclusive deferment and cancellation rights that you could lose if you consolidate. And if you work in public employment, you could lose any progress you’ve made toward public employee loan forgiveness. Once your federal student loans are combined into a Direct Consolidation Loan, they cannot be separated again. Therefore, consider the advantages and disadvantages of consolidation.

Reasons to consolidate your federal student loans into a Direct Consolidation Loan

Reasons not to consolidate your federal student loans into a Direct Consolidation Loan

Not sure if consolidating your loans is right for you, but having trouble meeting your monthly payments? Consider contacting your loan servicer to find out about deferment or forbearance as options for short-term payment relief, or consider switching to an income-based repayment plan.

Consolidation of your private loans

If you want to consolidate your private student loans, your only option is a private lender. You may have to pay a fee to consolidate your loans, but avoid companies that tell you to pay that fee up front.

Make sure you understand all the terms of your consolidated loan before agreeing to consolidation, especially if you have private and federal student loans. Some debt relief companies and lenders offer the option of consolidating private loans with federal loans. What they offer is a new loan to lower the amount of your monthly payments or the interest rate. Do not do it.

If you consolidate your private loans with your federal loans, your loan becomes a single private loan. That means you’ll lose your federal repayment benefits and protections, like payment deferment or forbearance, and you’ll no longer be able to access income-based repayment plans and potential loan forgiveness programs.

How to decide whether or not to consolidate your loans

Before you consolidate your loans, take your time. Find out what consolidation could mean in your specific case. If you have private loans, talk to your lender. For federal loans, call the Department of Education’s Loan Consolidation Information Center at 1-800-557-7394.

How to Avoid Student Loan Debt Relief Scams

You’ve probably seen ads for companies promising help with your student loan debt. But you need to know that there is nothing a debt relief company can do for you that you can’t do on your own for free. And some of the companies that promise debt relief are scams.

Here are some ways to avoid student loan debt relief scams:

help resources

You do not have to pay to get help with your student loans. There’s nothing a company can do for you that you can’t do yourself for free. If you have federal loans, start at StudentAid.gov/repay . If you have private loans, contact your lender directly.

What to do if you paid a scammer

Scammers often ask for payment methods that will hinder your chances of getting your money back. Regardless of how you paid a scammer, it’s best to act as soon as possible. See more information on how to get your money back .

Report scams

Report student loan scams to:

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