Being financially literate is incredibly valuable. By knowing how to manage one’s finances, students can avoid many of the pitfalls that await them when accessing higher education. It’s important to remember that student loan debt is the second highest in the United States. The average student in the Class of 2016 is in $37,172 in student loan debt.
Over 44.2 million people across the nation find themselves in the same situation, collectively owing more than $1.5 trillion. In making matters worse, some 40% of them are expected to default on their student loans by 2023.
But to be fair, student loans have helped millions of people get an education that they would, otherwise, not be able to afford. However, that same debt is often a significant impediment for homeownership and other such necessities.
Aside from student loans and debt, students should also be aware of the importance of their student credit scores, as well as about their credit cards.
What You Need to Know About Federal Student Loans
Among all loans available on the market, Federal student loans are unique. They are specifically designed for funding education and have several unique characteristics.
Lower Costs – Generally, student loans provide lower costs than other types of loans. The reason for this is that, for some students, the interest costs might be subsidized. In other cases, Federal student loans have relatively low fixed interest rates for new borrowers.
Easier Approval – Usually, students can’t get approved for any other type of loan than this one. They generally don’t have high-paying jobs or a high credit score. Federal student loans don’t typically require a credit score. Besides, these types of loans will establish you a credit score which will help you get other loans in the future. It is granted provided you make your payments on time.
Payback Benefits – Some student loans don’t require you to make any payments until you’re out of school. With other student loans, you can stop payment until you find a job, or adjust installments based on your income. In some exceptional cases, the interest you pay on your student loan can help reduce your taxes or can even have the student loan forgiven.
Common Types of Federal Student Loans
- Direct Subsidized Loans – These are loans available to students who can prove they require financial aid.
- Direct Unsubsidized Loans – The eligibility of these loans is not based on financial need.
- Direct PLUS Loans – These types of loans are granted to students and parents of dependent undergraduate students to pay for expenses not covered by other financial aid. Eligibility is not based on financial need but a good credit score.
- Direct Consolidation Loans – This type of loan will allow you to combine all of your eligible federal student loans into one loan with a single loan servicer.
- PELL Grants – These typically are granted to undergraduates who have an exceptional financial need and have not earned a higher education or professional degree. PELL grants do not have to be repaid, except under certain circumstances.
The Difference Between Federal and Private Student Loans
Federal loans offer the most benefits, are the most affordable and easiest to qualify. That said, you can borrow from whatever lender you want. Private lenders such as banks, credit unions, or online lenders can offer you student loans or standard loans that you can use for this purpose.
Nevertheless, these private lenders will generally require you to qualify for that loan. It means that you may need to have a good credit score as well as the sufficient income to repay it. When students don’t have either, typically a parent can apply for that loan as a cosigner – making them both responsible for repayment. Private loans usually have variable interest rates which means that if the rates rise, your payments will also increase.
What You Need to Know About Student Credit Scores and Credit Cards
As you’ve probably noticed up until this point, a credit score may be required in certain circumstances. A student credit score is the same as a regular credit score. It is based on the available information found in the credit report. Basically, the higher the number, the better the score.
Credit scores will affect the loan a bank or lending company will give you. If, for instance, you want a student bank account, your credit score will determine the maximum interest-free overdraft. It can also affect the amount as well as the limits on your student credit card.
You should know, however, that a Federal student loan will not affect your credit score. This information will only be used when applying for other credit, as lenders will want to know how much of your income will go into repaying that Federal loan.
What Constitutes a Good Credit Score?
The most common model used for credit scores is FICO. The scoring ranges from 300 to 850 points. A good credit score starts from 670 points upwards and will generate you the most benefits. To improve a credit score, you should make sure that you make all of your debt payments on time such as credit cards, private student loans, or any overdrafts. You can also increase your score by paying any bills on time.
Student Credit Cards
You can also get credit cards specifically designed for students. It’s generally accepted that college students don’t have a credit history, meaning that these credit cards are easier to get than other types.
Besides, student credit cards usually come with extra benefits such as various rewards, low-interest rates, and balance transfers, among others. These can be excellent tools to start a credit report and a credit score. All costs need to be paid on time to ensure that you will increase that score.
Financial Aid & Tuition with MyComputerCareer
MyComputerCareer is an ACCET (Accrediting Council for Continuing Education and Training) accredited organization that provides students with technical training and certification preparation in Information Technology (IT) in fields such as IT Security, Network Administration, and Helpdesk.
Both federal and public funding programs are available through MyComputerCareer, as well as state and federal assistance under the Workforce Innovation and Opportunities Act and Veterans Administration programs. Besides, the Admissions Director and Financial Aid Specialists will help you find the best financing solution that will fit your needs. Contact us today for more information!
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