What You Need to Know About Student Loans

Learn how to borrow smarter with these tips.


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Higher Learning, Higher Bills - Real talk: College tuition is crazy expensive nowadays. And for 75 percent of us, they’re the only way we can afford school. But before you sign on the dotted line, here’s what you need to know about student loans and how to borrow with caution. By Kellee Terrell (Photo: Alex Slobodkin / Getty Images)


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Not All Loans Are Created Equal - There are different types of loans and many of us will use a combination of them. Federal and state loans are loans you borrow from the government. Private loans (that might be less flexible and have higher interest rates) are monies you borrow from companies and banks. School loans are borrowed from your college or university. (Photo: Sadeugra/GettyImages)


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Fill Out an FAFSA - Before you can get a federal student loan, you have to fill out an FAFSA form. Depending on your financial need, this form will include either your parents’ financial information or yours. Once completed, you will receive an award letter letting you know which grants, scholarships and loans you qualify for. (Photo: ericsphotography/GettyImages)


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Read the Fine Print - Enlist the help of a financial aid officer and don’t be afraid to ask questions. Be crystal clear about how much you are taking out, the payment plans, the interest rates and whether or not you need a co-signer.(Photo: vitanovski/GettyImages)


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Don’t Take More Than You Need - Remember, this isn’t free money, and you will be expected to pay it back in full. So don’t go buck wild taking out more than you need so you can get a refund and live large. If you need more cash, try getting a campus job to fund your lifestyle. (Photo: mocker_bat/GettyImages)


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Subsidized Loans - Direct subsidized loans are granted to undergraduate students, where the school determines how much you can take out based on your financial need. The government pays the interest while you are in school and when your loans are in deferment.(Photo: ericsphotography/GettyImages)


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Unsubsidized Loans - Unsubsidized loans are for undergraduate and graduate students. They are not based on need, but your school can determine how much they are going to give you. You have to pay for all of your interest regardless of being in school or being deferred.(Photo: Jupiterimages/GettyImages)


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Direct Plus Loans - Direct Plus Loans are federal loans for graduate- or professional-degree students and parents of dependent undergraduate students. You have to have good credit to take out these kinds of loans. You are given six months to start paying this back after you graduate.(photo: GettyImages)


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The Interest Is Not a Game - School loans are like taking money from the bank — it accrues interest over time. So, if you just graduated from college, even though you have a grace period, you might want to pay some of that interest down now.(photo: GettyImages)


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What’s a Grace Period? - For recent grads, depending on the type of loan you have, you may have a grace period, from six months up to one year, where you do not have to repay your loans. This gives you time to look for a job and/or start saving. Your interest may still be accruing over this time, however. (photo: GettyImages)

Expand the Earned Income Tax Credit - The Child Tax Credit and Earned Income Tax Credit provides an average tax cut of about $800. The president would like Congress to expand the credit to workers who do not have children, including non-custodial parents. The administration believes this will "provide a more meaningful work incentive."   (Photo: Jeremy Woodhouse/Getty Images)

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What's Deferment? - When you can temporarily stop making payments for certain reasons such as working in public service, being a working mother on parental leave or are on temporary disability. You’re not charged interest during deferment with subsidized loans, but interest will continue on your unsubsidized loans and PLUS loans.(photo: GettyImages)

And Forbearance? - For people who do not qualify for deferment, you can apply for forbearance. If approved, you may be able to stop paying your loans for up to one year. Your interest is still accruing over this time, however.(Photo: Khuong Hoang/Getty Images)

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And Forbearance? - For people who do not qualify for deferment, you can apply for forbearance. If approved, you may be able to stop paying your loans for up to one year. Your interest is still accruing over this time, however.(Photo: Khuong Hoang/Getty Images)


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Either Way You Gotta Pay Up - No matter what, you must repay your student loans. Defaulting on your loans (not paying your loans for more than 270 days) can seriously ruin your credit. If you cannot afford your student loans, work with your loan officer to create a payment plan that works for you.(Photo: ShaunWilkinson/GettyImages)


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Should I Consolidate? - Consolidating is when a company takes over all of your different loans and you pay them monthly in one bill at one interest rate. Think very carefully about whether this is for you because you can end up making payments and paying interest for a longer period of time.(Photo: teekid/GettyImages)