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Do you know what your obligations are with student loans? You need to be aware of the rules of these loans and how to follow them once you start working. Take our Student Loans Quiz and learn about the rules that govern your student loans. You’ll be glad you took it! Here are some useful tips that will help you understand these complex loans better:
Interest rate on subsidized loans
Federal regulations govern the interest rate on student loans. In general, subsidized loans have a fixed interest rate. However, subsidized loans for graduate students may have variable interest rates. This is because the rate on these loans is based on the date the loan was first disbursed. The actual loan amount is the loan amount minus any origination fees. Undergraduate student loans have a variable interest rate, but a maximum rate of 8.25% may still be applicable.
Unsubsidized loans are unsecured and have higher interest rates. However, subsidized loans do have a 0% interest rate. Unsubsidized loans may be used to pay for graduate school, and do not require a financial need. While the government pays for subsidized loans, you are still responsible for the interest on a private student loan. While deferment is available, unsubsidized loans do not.
Duration of repayment period for subsidized loans
If you are enrolled in a college or university, you should understand the duration of repayment period for subsidized student loans. In many cases, a subsidized loan is repaid over the course of 10 years, but in some cases, it is extended to 15 years, and you can switch to a different repayment plan if you need more time. After you graduate, the loan starts accruing interest.
Students who have enrolled in a subsidized loan program are not eligible to take any more subsidized loans during this time. However, they are still eligible for unsubsidized loans, and the interest accrues on these loans if you continue to enroll. The interest is also capitalized during this period, which increases the amount of the loan. If you have graduated and need more money for school, a private student loan should be the next option.
Co-signer requirements for subsidized loans
A student who applies for subsidized student loans may use a family member or another creditworthy adult as a co-signer. If you don’t have family who can sign for you, there are many ways to find co-signers in your community. Alumni organizations and faith-based groups can help you find a suitable cosigner. Obviously, the cosigner must be of legal age and a US citizen or permanent resident.
When approaching a co-signer, be honest with them about the risks and benefits of signing for your loan. Discuss your finances and future goals before asking for a co-signer. While many students ask their parents for a co-signer, you can also ask a friend or family member with good credit. And you can always ask an alumni to co-sign a private loan for you.