Student debt is on the rise. One article found that 48% of millennials are paying off a student
loan. How much of a loan? 70% of current grads are walking away from college with $37,172 in student loans.
Fortunately, making a few changes can pay off big. See part one on our student loan debt series for more information about college choices that cost less.
If you’re thinking about financing college, here are questions to ask before you sign on the dotted line.
Fixed or variable/adjustable rate?
Like mortgages, most student loans come in two flavors – those with fixed rates and those with variable, or adjustable, interest rates. What’s that mean for borrowers? Fixed rate means the interest rate never changes throughout the life of
the loan, so borrowers have the same monthly payment amount until it’s paid off.
A variable interest rate means that your lender can adjust the rate. Adjustable rates often include a lower rate as a way to lure borrowers, but it can ultimately mean you’ll end up paying more over the life of the loan.
Can I restructure payments?
This is a service primarily included with federal student loans (the kind you get by completing your financial aid, or FAFSA, application) - not private ones. With a payment restructure clause, you may be allowed to adjust your payment amount depending
on the amount of money you earn.
Am I penalized for paying it off early?
Ultimately, private borrowers offer student loans as a way to make money. Lenders earn money by charging borrowers interest and fees in exchange for using their funds to finance an education. As a result, some loans from private, or non-government lenders,
require borrowers to pay a fee or percentage if they’re paying it off early.
What kind of "grace" does this include?
Conversely to paying a loan off early, you’ll want to get to know what kind of offerings are provided if you’re having trouble meeting your loan. In general, federal loans offer borrowers more “grace” than private loans. This can
include providing borrowers with a penalty-free amount of time if they’re having trouble making payments and deferment and forbearance in times of need, like a health concern or loss of job.
Need budgeting help? We've got your back
If you need budgeting tools or an account to help you save faster, your local branch can help. Contact your neighborhood loan officer to get started.