The Naked Truth About College Loans

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We’re not going to lie. Paying for college is tough and going into debt for college is not ideal. If you can pay cash for college, that is great! But for the rest of us, Financial Aid often becomes the next best option. We want to make sure you have the scoop on all things student loans, so you don’t fall into any traps along the way.

We’re not saying you should never take a loan, we just want to make sure you know all the facts before you do. We collected important information about student loans to help you think critically about your options.

Here are some most-asked questions and resources for you:

Q: What’s the current amount of school loan debt in the US?

A: There is more than $1.2 trillion in student loan debt in the U.S. and an average balance of $29,000 per graduate.

Q: What is the difference between federal aid and private student loans?

A: Federal loans should be considered before private loans. Federal loans allow you to borrow money from the government with a competitive interest rate and various repayment options while private loans do not. Private student loans typically come from a bank or credit union, or another private lender. These loans are credit-based and have inconsistent interest rates that can be fairly high. Very few private lenders allow you to consolidate your loans too.

Here is a great source for options to pay for college (potentially without a loan) by using Federal Aid, State Aid, Military Aid and personal funding. Check it out!

Q: Why are college loans charged at a higher interest rate than house loans?

A: Congress sets the rate for house loans and the market sets the rate for school loans (which means they’re not capped or regulated like the mortgage industry).

Q: Why can’t they be lower than house or car loans? Education is so important to quality of life!

A: Well, for one thing, house and car loans involve property that can be taken back and a school loan doesn’t, so the lender’s risk is much lower. Because an education is not a tangible asset, there’s not much lenders have to leverage with for those who don’t pay or default.

Q: How long does it typically take to pay off school loans?

A: This depends on how big your debt is and how much you make in your job or career. On average, it takes about 10 years for most people to pay off a loan of about $30,000, but it takes many people closer to 21 years to pay off student loans.

Q: What are the professions that help pay off school loans quicker? What are the ones that are slower–on average?

A: Many teachers who work in a high-need or low income area for about five years, can qualify to have up to $17,500 of their federal student loan “forgiven” or paid off. Some healthcare fields, especially nursing, will pay a percentage of student loan debt if you agree to work for them for three years. Veterinary Medicine graduates may also receive loan forgiveness assistance, as well as some government careers. The military typically pays for education for those who are serving. Careers like advertising, economist, engineering pay well, which would allow you to pay off your loans a little quicker. Read this and this for more information.

As far as professions that are slower in paying off student loans, I think that would depend on where you live and different opportunities available to you. A career field that does not have competitive pay or is not in high need could be tricky. You can still do it, but paying off your loans may take a little longer.

Q: Over the life of a $50,000 loan, if I just pay the minimum, how much extra will I pay out overall?

A: Assuming you make loan payments of $200 a month for ten years, you would pay almost $20,000 in interest. You can use the FinAid Loan Calculator to figure out what your payments and interest would be.

Q: What happens if you can’t pay your loan?

A: If you can’t make payments because you’re unemployed or are returning to school, you may qualify for a forbearance, which will reduce or temporarily hold your payments. If you cannot make your payment at all, immediately contact the lender to discuss options. If you walk away from loan payments, you may affect your credit score and fall into delinquency and eventually into default. That’s not good. Talk to your lender about payment plans right away.

Q: What are some strategies for paying off student loans I can start now?

A: Make a budget while you’re still in school and save $100 (or more) each month to pay off your loan or make payments while you’re attending school. Make a three to five year plan for paying off your loans by watching your spending and being committed to eliminating the loan. The snowball plan works great for this! Also, apply for grants and scholarships (even if you think you won’t get it.) It’s worth a try!

Also, keep in mind what some sneaky additional costs are for attending college like gas, transportation and food. It’s helpful to save up for these expenses and budget for them. Here is a free budgeting tool.

Q: I really want to go to _______ private institution or nonprofit university even though it’s more expensive than my state school. Is it worth it?

A: Typically, students who attended public or nonprofit schools have lower default rates and higher earnings. If you’re looking into a competitive field or a high-paying career, then it’s probably worth it. Weigh the pros and cons and make the best choice for you.

Conclusion: Know the facts about student loans. Do the math and you might be better off in the long run. Student loans aren’t all bad, but taking them out blindly can be a big mistake. Know what you’re in for and make a wise plan beforehand. It’s helpful to find out how much debt students graduate with at the school of your choice and what the percentage is of students graduating with loan debt. Pursue your dreams, but know what your dream job pays so you can have idea of what it will take to pay back your loans.

You can do it!

P.S. Here are two other resources we want to make sure you have:

– Use this tool to find out how much your prospective college gives to help low-income students.
– On this site, Rachel Cruz gives some great money and college planning tips.


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Esther Laurie is a staff writer at Her background is in communication and church ministry. She believes in the power of the written word and the beauty of transformation and empowering others. When she’s not working, she loves running, exploring new places and time with friends and family. It’s her goal to work the word ‘whimsy’ into most conversations.