If you’re a student, one of the first things you need to do is understand your options for financing your education. That way, you can ensure you get the best deal available. The second thing you should do is talk to someone who has been through this process before and knows what it’s like. This article will help with both of those things!
Interest Rates & APR
When you talk about interest rates, you often refer to Annual Percentage Rates (APR). This means the cost of a loan is expressed as a percentage of the amount borrowed. According to Lantern by SoFi professionals, “The overall average private student loan interest rate majorly ranges from 6% to 7%.”
The difference between an interest rate and APR is that the former is fixed while the latter can be variable or fixed. Interest rates are typically reported as annual figures, while APRs are usually found in monthly or quarterly statements.
Because student loans carry higher interest than other types of credit products, it’s important to understand what kind of interest you’ll be paying on your debt before signing up for one.
Student Loans Will Affect Your Credit Score
When you take out a student loan, it becomes part of your credit report. This means that if you don’t pay on time or default on a loan, it will affect your credit score. This is because lenders look at how well you manage past debts when deciding whether to extend new credit (like auto loans) and what interest rate they offer.
The major factor that affects your score is payment history—whether or not you’ve made payments on time and paid off entire balances by the due date.
You Can Borrow More Than Your College Costs
As a student, you can borrow up to the full cost of attendance. Your cost of attendance includes tuition and fees, room and board, books and supplies, transportation and other living expenses.
What’s more, as long as your school is an eligible school as determined by the U.S Department of Education (this means it’s accredited), you may be able to borrow up to $20,500 for a first-year undergraduate student or $25,500 for a second-year undergraduate or graduate student for each academic year beginning on July 1st following high school graduation or completion of GED requirements (or equivalent).
You Can’t Get Rid of Student Debt in Bankruptcy Court
You can’t get rid of student loans in bankruptcy court. Unlike some other types of debt, student loan debt isn’t dischargeable in bankruptcy. The main reason for this is that the government doesn’t want people simply walking away from their obligations to pay back the money that was borrowed to go to college or trade school, especially since it was borrowed with good faith and at least a little bit of planning on your part.
These are some things you need to know before taking a student loan. For example, it may be easier for you to decide if you know about it.
With all this information, you can now decide whether the student loan is right for you.