Here in the month of June students who are planning to attend a traditional college or university, or even a nontraditional educational institution, may be in a position where loans are their only option in terms of financial assistance to help meet tuition costs. Students who are planning to enter school for the first time in the fall or may be returning to school have typically been in a position where student loans are necessary, simply because access to financial assistance through scholarships and grants may be more limited, but with increases in the cost of tuition, some are finding that even these resources of aid are not helpful.
One problem that has come from rising tuition though, centers around the amount of debt that students are carrying upon graduation and, in many cases, the inability to pay off what they owe. There have been some students who graduate college with an excessive amount of student loan debt and are in a position where they cannot repay what they owe. Yet, a further problem has presented itself in the eyes of many financial aid counselors which centers around the types of loans that students choose to meet these tuition assistance needs.
Private student loans are beginning to advertise more benefits in the hopes of competing with popular federal loans, and some students may see that a private student loan will be more affordable in terms of interest or may offer comparable benefits or repayment options for those who pay on-time or may have some form of economic hardship in their life after school. Also there are students who have used private loans as a way to consolidate multiple student loan debts, which can be helpful if the total minimum payment a student must meet each month is beyond their means and consolidation can lead to more affordability.
There are, though, many who argue that private student loans are to be used as a last resort as they do not offer rates as low as some federal loans in most cases, and even if these rates are quite affordable they are usually adjustable and may lead to higher costs later if the rate increases. Also, many often tout the benefits of federal loans simply because there are repayment options like forbearance plans, income-based repayment programs, and even student loan forgiveness for graduates who enter into specific careers.
However, there are also private loans that are competing in this area as students who make on-time payments may, when working with certain lenders, be forgiven of some of their loan’s amount or be offered incentives for keeping their payments current. The problem that many still face is what type of loans should be used if student loans are the only option remaining. While, again, students are being prompted to consult with financial aid offices and scour the Internet for scholarship and grant assistance available for their specific major or in their area, but if loans are necessary, students must compare rates and repayment options that are available. This lesson may become more evident in the coming months as some students who have recently graduated may face a situation where unemployment or underemployment could require them to enact clauses where more affordable payments or even suspension of payments is necessary for a period of time.