As the cost of a college education has continued to rise, 69 percent of college students 1 in 2019 took out student loans to make ends meet. Tuition, fees and room and board at private four-year colleges cost on average $49,640, while public universities clock in at $19,640, according to the College Board. While financial aid may cover some of the cost, most students need help paying the bills, and the typical borrower owes $29,900 by the time they leave college-loans they took out when they were barely old enough to vote. Even parents, who guide their high school seniors through the financial aid process, often don’t understand the basics of student loans and what’s available. Parents themselves hold an average of $37,200 in loans to help their kids get through school.
Students taking at least six credits can take out federal student loans, which are backed by the government. Rules about their terms and conditions are set by law. In addition to fixed interest rates, federal student loans also come with flexible repayment options and, in some cases, loan forgiveness.
Federal student loans can be either subsidized or unsubsidized. Interest on subsidized loans is paid by the government while you’re in school, for the first six months after graduation, and during any periods of deferment. Subsidized loans are only available to undergraduates and have smaller loan limits. That’s not the case for unsubsidized loans, which have interest that immediately accrues.
Undergraduates can borrow up to $5,500 their first year, $6,500 their second year, and $7,500 their third, fourth, and fifth year through a combination of subsidized and unsubsidized loans. Students who are not claimed as dependents on their parents’ tax returns can borrow higher amounts.
For some students, federal loans may not be enough to cover their college expenses, and they may need to look blog link at other sources of financing for their education.