Financial Aid : The Student Loan Market

Understanding the Student Loan Market

When it comes to financing, there is a complex market for student loans and college financing. Despite all of the reading that I have done on the subject, I learned quite a bit about student loans when I read an informative article on the New York Times about understanding the student loan market.

Often times, understanding the type of loan that you have can make a big difference. Subsidized loans are a big plus when it comes to financing because they generally have lower interest rates and have the ability to be consolidated. This means that all of the small loans can be lumped together for a single payment, generally at a very low, tax deductible interest rate.

Unsubsidized loans are not-so-friendly. Often you can be stuck with this option when it comes to financing college. I had to use one for the balance of my last year in college. But really they are nothing more than a glorified credit card.

Co-Signing Woes

When I took the loan, I had very little credit. My mother had to co-sign for this loan and since she had to take money on her own to pay for school (remember that nasty EFC from the beginning of this article), it really felt like she was getting hit twice for my student loan debt. Even though she never had to pay any of this debt and I wasn’t ever late on a payment (thank goodness!), she still had to live with that loan on her credit report for several years until I could transfer it into a loan in my own name. This affected her refinancing on her mortgage and various other financial decisions.

And taking an unsubsidized loan meant that I had a higher interest rate on my money and that the payment was designed to keep me in debt. So be aware of this when you get your first payment. Keep track of your balance and be sure that you are getting a decent chunk of the principal paid each month so that you are making progress on paying these debts off.

Resources

Now that you know about the loan market, you might want to look into some of the federal options for student loans since these tend to be a little nicer than private companies. However, be aware that your school must be affiliated with the program in order to get this kind of funding. Find out if Direct Loans Might not be an option.

And if you are in the market for private student loans, you might want to comparison shop. The idea of LendingTree where people compete for various loans for other items like mortgages has been merged with the Student Loan market at a site called TuitionCoach.

Disclaimer
As always, none of the links in this article or information is certified by Help Your Money. This article is for informational purposes only and is not financial advice. We are not affiliated with any of the companies or organizations mentioned in this article and recommend that you learn as much as you can and consult professionals before making your decisions about college financing since these decisions can shape your financial future for decades to come.