If you don't know the First 4 Things You Need to Know... do yourself a favor. Today, I'm continuing with Q & A all about student loans - particularly, taking loans out. These are legit answers from one of Michigan First's Student Loan Representatives, Patricia Poplicean.
So many college students are clueless when it comes to loans, but that can cause you to waste a lot of mullah. Here are the next 4 things you need to know:
1. If I can afford to pay out of pocket, should I still take out loans?
No. However, if you qualify for the direct subsidized loan or Perkins loan (government pays interest while student attends school at least half-time), you may want to consider these loans. So, this would be an interest free loan until the student graduates, drops below half-time status or separates from school. If the student chooses to take this loan, they would begin establishing a credit history. The important thing is this – PAY THIS LOAN OFF BEFORE THE INTEREST BEGINS TO ACCRUE and if you don’t plan to do that, don’t take the loan. Pay for your education out of pocket.
2. What is a “good” interest rate? Bad? What is this rate based on?
A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest rates change and may be based on an index such as the prime or LIBOR (London Internet Offered Rate). As a result, your payments will vary as well.
Fixed interest rate loans are loans in which the interest rate charged on the loan will remain fixed for that loan's entire term, no matter what market interest rates do. This will result in your payments being the same over the entire term. When a loan is fixed for its entire term, it will be fixed at the then prevailing market interest rate, plus or minus a spread that is unique to the borrower.
3. What's the difference between fixed and variable interest rates?
Fixed rates won’t change which means a monthly payment will be the same throughout the life of a loan. With a variable-rate loan, the interest rate on the loan changes as the index rate changes, meaning that it could go up or down. Because an interest rate can go up, a monthly payment can also go up.
4. What is Michigan First Credit Union’s option for student loans?
Loan option for undergraduate students:
They offer a private loan solution that will help fill the funding gaps that may exist after all lower-cost sources of aid (including scholarships and federal direct loans) have been exhausted.
- Competitive low interest rates
- Flexible repayment and in-school deferment options
- Student’s loan (may need a cosigner)
- Easy online application and instant credit decision
- 24/7 call center and application support
- Convenient line of credit structure with just one application
- A loan from a local, not for profit lender that you can trust for years to come
If you're not receiving enough federal funding, feel free to check out Michigan First's student loans options!