In particular, there have been a lot of questions regarding student loans. Which loans should you accept? Which loans should you steer clear of? Here is a general recommended order of borrowing that we suggest.
First of all, if you are eligible for any Subsidized Stafford Loans, these are typically your best option. They offer a low fixed interest rate determined by the federal government. They are borrowed in the student’s name and do not require a co-signer. Interest does not accrue on these loans until you are done with school, and payments are not required until six months after you’re done with school.
After you’ve exhausted your Subsidized loan eligibility, we would recommend turning to any of the Unsubsidized Stafford Loans. They are basically the same as the Subsidized loans, the only primary difference being that interest does accrue on these loans while you’re in college. You can choose to pay on the interest while you’re in school if you’d like, but it is not required.
After you’ve exhausted your Federal Subsidized and Unsubsidized Stafford Loans, we typically recommend you look into borrowing from a Private lender. You can, and should, check with whoever you do your local banking with to see what they have to offer. You may also check online for different lenders. One option that we tell families about is Iowa Student Loan. They are located in Des Moines, and currently offer an interest rate range from 4.35-6.85%. There is a lot more information on their website, so check them out: www.iowastudentloan.org.
And lastly, the PLUS loan is an option for many parents who wish to borrow on their student’s behalf. We don’t typically recommend this option because it has origination fees over 4.2% and for the 2019-2020 school year, money was borrowed at 7.08% in parents’ names. If we go back and look at the previous option of Iowa Student Loan, even if you qualified for the worst interest rate advertised, you would get a 6.85% rate with no origination fees.
Hopefully this information gives you a general idea of a recommended order of borrowing. There are always unique scenarios that may occur that might change things. Feel free to check out our website https://www.icansucceed.org/financial-aid/student-loans where you can read more about student loans.
If you have any questions, please don’t hesitate to contact us! Even with the pandemic, we are operating business from home quite well utilizing different technology. We are able to answer the phones M-Th, 8:00-4:30 and help with virtual appointments using Zoom. So give us a call at 877-272-4692 or visit www.icansucceed.org/apt to schedule an appointment.
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