Subsidized vs. unsubsidized loans – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

The federal direct loan program offers subsidized and unsubsidized loans to college students. A federal direct subsidized loan is a loan where the government pays the interest while the student is in school. A federal direct unsubsidized loan is one in which the student is responsible for paying all interest, receiving no additional federal aid.

What Is the Difference Between Subsidized and Unsubsidized Student Loans?

The main differences between federal direct subsidized and unsubsidized loans are the qualification criteria, the maximum limits and how the loan interest works.

A chart displaying the differences between subsidized and unsubsidized student loans.

Loan Qualifications

Subsidized: To qualify for a subsidized loan, you must be an undergraduate student who can demonstrate financial need based on the information you submit through the Free Application for Federal Student Aid (“FAFSA”).

Unsubsidized: Unsubsidized loans are available to both undergraduate and graduate students, and there is no requirement to demonstrate financial need.

Maximum Loan Limits

Subsidized: Your school will determine exactly how much you can borrow each year, but there are federal limits. These limits are based on what year of school you are in and whether you file as a dependent or an independent. Subsidized loan limits tend to be lower than unsubsidized limits. The aggregate limit for an independent student with subsidized loans is $23,000.

Unsubsidized: Unsubsidized loan limits tend to be higher than subsidized loan limits. The aggregate limit for an independent student with unsubsidized loans is $34,500.

How Interest Accrues

Subsidized: The U.S. Department of Education pays the interest for subsidized loans as long as the student is enrolled in school at least half-time. They will also pay the interest during your grace period—defined as the first six months after leaving school—and any period of deferment. This means that the amount of the loan will not grow once the student graduates, since the government has been paying the interest.

Unsubsidized: Whether you’re an undergraduate or a graduate student, you’re responsible for paying all of the interest during the entire life of your unsubsidized loan.

What Are the Similarities Between Subsidized and Unsubsidized Student Loans?

When it comes to interest rates, fees and the “maximum eligibility period”—the amount of time you’re able to take out loans—subsidized and unsubsidized loans are virtually the same.

Fees

On top of interest, you can expect to pay a small fee for both types of loans. This is approximately 1.06 percent of your total loan amount, and it is deducted from each loan disbursement. 

Both subsidized and unsubsidized student loans have a fee of 1.06% of the total loan amount.

Undergraduate Interest Rates

The interest rates for both subsidized and unsubsidized loans for undergraduate students are the same. Currently, the rate is at 2.75 percent for loans first disbursed from July 1st, 2020, to June 31st, 2021. The one exception is for direct unsubsidized loans for graduate students, which have an interest rate of 4.30 percent. 

Maximum Eligibility Period

For both loan types, the time in which you’re eligible for your loans is equal to 150 percent of the time of your program. For undergraduates pursuing a four-year bachelor’s degree, this means they will be eligible for their loans for six years. Those pursuing a two-year associate’s degree will be eligible for three years. This ensures that students can still receive loans even if they’re unable or choose not to graduate within the program’s time frame. 

How to Apply for Subsidized and Unsubsidized Loans

Once you’re ready to apply for a federal direct loan, fill out the FAFSA. Your school will send you a detailed report of what student aid you’re eligible for. Any grants or scholarships are free money, so make sure to accept them. They’ll also decide which loans you’re eligible for, the amount you can borrow each year and what loan type you can get—subsidized or unsubsidized. 

No matter what type of student loan you go for, it’s important to understand how they affect your credit so that you can set yourself up for financial success after graduation. With responsible, on-time payments, you’ll be well on your way to healthy credit for life.


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Guide to merchant cash advances – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Merchant cash advances are becoming a popular form of credit for all types of businesses. Once a tool offered mostly by credit card companies, merchant cash advance loans are now available to many businesses through payment processes including PayPal, Stripe and Square.

If you process payments regularly through certain services, that might make this form of credit readily available to you—but is it a good choice for your business? Find out more below.

What Is a Merchant Cash Advance?

A merchant cash advance is a type of debt tied to the revenue your business processes via credit cards or through a specific payment processor. Some providers, such as Stripe and PayPal, refer to this debt as working capital loans, but others simply call it a cash advance.

Depending on the provider of the merchant cash advance, this form of debt can have different impacts on your credit and future revenue.

How Does a Merchant Cash Advance Work?

While the details of merchant cash advances vary according to provider and contract, the basic principles are typically the same. You apply to borrow money via your merchant network or payment processor. That entity usually works with a partner bank to provide the loan.

Whether or not you get the loan and how much you’re approved for usually depends on how much revenue you generated within the past year or so. In some cases, the bank may also check your personal or business credit.

Once the loan is approved, you receive the funds quickly. In some cases, it’s less than 24 hours. Within a few days, loan repayments begin via holdback processes.

What Is a Holdback?

Holdbacks are the amount that is withheld from your revenue to pay back the merchant cash advance. When you accept one of these advances, you agree that the payment processor can take a certain percentage of your daily receipts processed through that agency in payment of the loan.

For example, if you borrow $20,000 and agree to a 10 percent holdback, then 10 percent of your revenue processed through that payment processor each day is held back until you pay off the loan. If you have $1,000 in revenue for a specific day, then you would only receive $900 of it.

Merchant Cash Advances: Pros

Merchant cash advances are popular with many businesses because they’re easy and convenient. Check out some of the benefits of this financing source below.

You Don’t Have to Risk Your Assets

This form of debt is tied to your future sales and isn’t secured by any of your assets. If your sales through the relevant channel are less than expected and you don’t meet the minimum payment requirements of the cash advance agreement, you might be billed or turned over to collections.

But, the merchant doesn’t have the ability to force the sale of your assets to recoup the debt in the same way it would if you used those assets for collateral.

You Can Get Money Quickly

Merchant cash advances are one of the fastest ways to access funds via credit. In some cases, once approved, these entities might fund your merchant account within minutes.

Because many banks determine whether you qualify for these advances based primarily on the strength of your revenue, you also usually aren’t required to provide a lot of documentation. The payment processor already has all the information they need about how much revenue you process through them.

You Can Use the Money However You Like

Typically, as long as you’re using the funds for business purposes, you can use the money as you like. You aren’t tied to a specific loan purpose or rules about whether the funds are for working capital or equipment investments.

Merchant Cash Advances: Cons

As with any form of debt, merchant cash advances aren’t perfect for every situation, and they do come with some downsides. Learn about the potential disadvantages below so you can make the most informed decision for your business.

It’s a Short-Term Solution

Merchant cash advances can be a great short-term solution for cash flow issues that are temporary in nature. For example, if you need to invest in more inventory for a holiday season before the higher revenues associated with that season roll in, merchant cash advances can help you do that.

But it’s still only a short-term solution, and if your business doesn’t generate enough income to cover expenses on an ongoing basis, cash advances are at best a metaphorical money Band-Aid that covers up real issues.

Before you rely heavily on these advances in the long term, make sure you fully understand your business’s financial state and are managing accounts and cash appropriately.

Your APR Could Be Very High

The debt obviously isn’t free. Often, merchant cash advances come with flat fees that are baked into the loan. The amount you pay might be determined in part by how much you borrow and what holdback rate you agree to.

For example, if you borrow $5,000 and agree to a 30 percent holdback to pay it off faster, you might pay a smaller fee than if you borrow $5,000 and agree to a 10 percent holdback, which would lead to a longer repayment time.

Fees for cash advances can be thousands of dollars, and when you convert those fees into an APR, you might be surprised that the cash advance isn’t quite as affordable as you thought.

Depending on the terms, how much you want to borrow and how you can pay it back, you might be better off with the APR on a traditional business loan if your credit is good enough to support one.

Merchant Cash Advance Companies Aren’t Federally Regulated

Companies that offer merchant cash advances aren’t typically federally regulated. That means you don’t always have the same protections as a consumer that you would have when dealing with a traditional lender. If you decide that this type of funding is right for your business, make sure you deal with known, reputable organizations to help protect yourself.

Is a Merchant Cash Advance Right for Your Business?

Whether a merchant cash advance is right for your business is a personal decision, but you can ask yourself the following questions to help you make this determination.

  • Can you afford to lose a certain percentage of your income through this revenue stream in the near future? If your profit margins are very low or you’re already barely covering bills, you may struggle once that percentage is being held back.
  • Are you using the cash advance to fund growth or get through a temporary, known issue, or are you using it as a Band-Aid for larger financial problems? If it’s the latter, a merchant advance may at most delay the problems a little bit, but it’s not likely to solve them.
  • Do you understand all the terms of the cash advance, and is this the most affordable way you can get financing for your business? Compare options and ensure that a business loan, a line of credit or another financing method isn’t an option or wouldn’t be less costly in the long run.

Merchant Cash Advances and Your Credit

How merchant cash advances are impacted by your credit—or impact your credit—depend on the way the lender operates. In many cases, you don’t need good credit because approvals are based on your historical revenue numbers.

Some lenders don’t check your credit at all, but others do, and that can lead to a hard inquiry. If you default on the loan, you might also end up with a negative collections item on your credit report. Balancing personal and business credit can be complex.

If you discover that your two worlds are colliding, consider Lexington Law’s credit repair services to help address any inaccurate negative items on your personal credit report.


Reviewed by Daniel Woolston, an Assistant Managing Attorney at Lexington Law Firm. Written by Lexington Law.

Daniel Woolston is the Assistant Managing Attorney in the Arizona office. Mr. Woolston was born in Houston, Texas and raised in Sugar Land, Texas. He received his B.S. in Political Science at Brigham Young University and his Juris Doctorate at Arizona State University. After graduation, Mr. Woolston worked as a misdemeanor and felony prosecutor in Arizona. He has conducted numerous jury trials and hundreds of other court hearings. While at Lexington Law Firm, Mr. Woolston dedicates his time to training paralegals and attorneys in credit repair, problem solving, and ethical and legal compliance. Daniel is licensed to practice law in Arizona, Oklahoma, and Nevada. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

What is the Student Loan Grace Period? – Lexington Law

Student Loan Grace Period Header Image

The student loan grace period is the time given to you before you’re required to start paying back your student loans. The amount of time given varies depending on the loan you take out. The intent behind the grace period is to give graduates time to find a job and get financially prepared before the first payment is due. Unfortunately, not all student loans have grace periods. 

Our guide will answer common questions and explain crucial details you need to know about the student loan grace period.

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Does Interest Accrue During the Grace Period?

For most student loans, interest will accrue even during your grace period. Interest does not accrue during the grace period for Federal Perkins loans or subsidized Stafford loans made before July 1, 2012, or after July 1, 2014. 

If you have unsubsidized loans or a subsidized Stafford loan made between July 1, 2012, and July 1, 2014, interest will accrue during deferment and grace periods. Unpaid interest is generally capitalized (added to the principal balance) following the grace period.

How Long is a Student Loan Grace Period?

Different loans have different grace periods. For private loans, you should review the specific terms of the loan to find out if you have a grace period and how long it is. 

  • Federal Stafford loans receive a six-month grace period.
  • Federal Perkins loans receive a nine-month grace period and are allowed another six-month grace period after an eligible deferment.
  • PLUS loans have no grace period, but you may be eligible for deferment.

When Does the Grace Period Start?

For most federal loans, your grace period begins after you leave college. This includes: 

  • Graduation 
  • If you withdraw from school
  • If you drop below half-time enrollment

Definitions for half-time enrollment vary by school, so check with your financial aid office if you adjust your class schedule.

Can the Student Loan Grace Period Change?

Certain circumstances may change your grace period, such as:

  • Active military duty: If you’re called to active duty for longer than 30 days during your grace period, you’ll receive a six-month grace period when you return from active duty.
  • Returning to school: If you re-enroll in school at least half-time during your grace period, you’ll have a full six months to begin repayment once you graduate or drop below half-time enrollment. 
  • Loan consolidation: Once you consolidate your loans, you lose any remaining grace period. You’ll receive your first bills approximately two months after the new direct consolidation loan is disbursed. 

What Happens When the Grace Period Ends?

Repayment starts when your grace period ends. Your loan servicer should provide a loan repayment schedule stating when your first payment is due. The schedule will detail the amount required in your monthly payments. If you need more time to find a job after your grace period ends, you can pursue an unemployment deferment or an income-based repayment plan.

How to Take Advantage of the Grace Period?

One of the best ways to prepare during your grace period is by establishing yourself financially.

  • Find employment that will help you make your monthly student loan payments.
  • If interest does accrue during your grace period, consider paying the interest before repayment begins. When interest is capitalized at the end of the grace period, interest is charged on the higher principal balance. 
  • Determine your repayment plan as early as possible. Understanding the details of repayment can save you time and money.
  • If you already have a job, start setting aside money for an emergency fund. This will be invaluable when unexpected events happen, and can prevent you from defaulting on your student loan.

How Student Loan Payments Affect Your Credit Score

As with any debt, student loans can affect your credit score positively or negatively. A student loan payment can help you establish credit history, improve the diversity of your accounts and show that you can responsibly manage a loan. However, late payments or defaulting on your loan can hurt your credit.

Keep an eye on your credit report to make sure your payments are correctly reported. Just one misreported late payment can hurt your credit score significantly. If you’re not sure where to start, you can contact Lexington Law firm for a free credit report consultation to get a better idea of where you stand.

Source: lexingtonlaw.com

Cheap Wedding Gifts Don’t Need to Look Cheap

Wine glasses are a popular registry item, but you can take this gift a step further by making DIY painted glasses as a memorable wedding present. And it can be personalized.
Get ready to start the hunt for cheap wedding gifts and that’s because you will probably be going to more ceremonies this year.
Did you know Sharpies are magic? So magic, in fact, you can create personalized plates like these ones from Orthodox Mom.
While seeing friends and celebrating love is a wonderful thing to look forward to, your wallet won’t be too happy about paying for all those wedding gifts. If you’re looking to save by giving DIY or repurposed gifts this year, consider these wedding gift ideas.

15 Ideas for Cheap Wedding Gifts

These photo coasters from The Frugal Girls are simpler than they sound, and are also quite affordable. Give yourself some time, though, to allow the sealer to dry over pictures adhered to the tiles.
Catherine Hiles is a contributor to The Penny Hoarder.

1. Personalized Puzzles

To make it even better as a wedding gift, you could paint the couple’s names and wedding date onto one of the boards.
If you know the couple’s wedding song (and have legible handwriting), this song-lyric canvas from Swiish would make a stunning gift.

2. Painted Plant Pots

Choose from a variety of patterns at The Spruce Crafts, or create a unique pattern to celebrate your friends and their love.
A survey by The Knot shows that almost 32% of couples who got married postponed their receptions, while 15% put off their entire weddings to 2021. Add those receptions to the ones already planned for 2021, and you could end up attending a whole bunch of weddings this year.

3. Scrabble Tile Frame

The COVID-19 pandemic put a wrench in all sorts of plans in 2020, from festivals and races to graduation ceremonies and weddings. While limiting gatherings has been key to controlling the virus over the past year, it has caused many Americans plenty of grief, loss and sadness.
Eat, Drink and Save Money has a couple of easy tutorials; one using chalkboard paint and the other using either gloss enamel paint or glass markers.

This illustration shows a recipe book laid out on a table with fresh ingredients all around it.
Getty Images

4. Personalized Recipe Book

With people eating at home more than ever, your gift will help your friends try new recipes together as they start their life as newlyweds. If you have some extra cash, consider buying a piece of cooking equipment or utensils to go with such as baking sheets and potholders. Maybe even cooking aprons, one for each.
You could make them into “giving plates” intended to be used as a reusable platter for food to be given as gifts, such as Christmas cookies, like this clever blogger did, or decorate a few with your favorite recipes.
String art is fun and easy to learn. A DIY string heart is a thoughtful and unique gift idea that will match the decor in just about any home.

5. Wooden Photo Hanger

Check out our 15 from-the-heart wedding gift ideas that won’t break the bank.
Though Heels in the Mud doesn’t go through each step, it looks pretty easy to figure out — especially if you bring a photo of the project into your local hardware store. This project involves staining and finishing a length of 2-by-4 wood, running a wire line from end to end and then adding small decorative pincher pins to hold photos.
If the happy couple has a puzzle obsession, you can have a personalized puzzle made for them. Use a photo from their engagement session (or their pandemic wedding ceremony, if they had one) or one from a favorite vacation they took together. Shutterfly has several layout options, from single images to collages, that they will love working on together.

6. Plates with a Message

Source: thepennyhoarder.com
Couples who were planning to get married in 2020 had a few choices. They could keep their plans in place and reduce their guest lists, get hitched in 2020 and push the reception to 2021 or postpone the whole shebang a year.

7. Photo Coasters

This is an easy DIY following the step-by-step instructions from Curbly.
If you want to give something that will help the happy couple celebrate their major milestones together, put together a curated wine collection with personalized tags.

8. Hand-Painted Song Lyrics

Another popular pandemic pastime involves having a green thumb. If your friends now have a large collection of succulents and other indoor (or even outdoor) plants, you can gift them a hand-painted pot to display their green offspring.
Use high-quality photos of the couple or maps of meaningful spots, and you’ll have a beautiful (and useful!) gift.

9. DIY Welcome Mat

Look for old Scrabble sets at your local thrift stores (or raid Mom’s basement or game closet) . Use a shadow-box frame and glue the couple’s names onto a piece of cardboard that fits the frame. If you have calligraphy skills, add their wedding date, or embellish with heart or flower stickers around their names.
Whether you have one wedding or 15 weddings to go to this year, you can save money and surprise your friends with unique gifts by going the DIY route. Which one will you try first?

Wine sits in a crate on a wooden table.
Getty Images

10. Milestone Wine Collection

That’s one thing I’d hang on my wall for sure!
Use old Scrabble tiles to create a one-of-a-kind piece of art for the couple’s wedding gift. You can check Etsy if you don’t have the patience to DIY this one, but it’s a pretty easy (and cheap!) project with a big impact.

11. Wedding Cross-Stitch

This craft uses minimal supplies which you probably already have lying around the house, but it’ll create a fun, affordable wedding gift that your friends will cherish.
As Savvy Eats says, a personalized cookbook really is “one of the best gifts you’ll ever give.”

12. Map Art

Instead of just including your favorite recipes, request them from the couple’s friends and family members as well. Ask them to type up their favorites, plus a note to the couple, then you can compile them into a sweet and meaningful book.
This example from Delightfully Noted uses three locations: where the couple met, where they married and where they live. Look for a cheap map and frame online and follow the instructions to create a one-of-a-kind gift that the couple will treasure. This is a thoughtful and inexpensive wedding gift idea.

personalized wine glasses for a bride and groom sit on a table.
Getty Images

13. Painted Wine Glasses

Travel is still limited for many people in 2021, so the newlyweds may not be able to explore the globe during their first year of marriage. Bring the magic of travel to their home with a DIY map art gift.
Puzzles saw a resurgence in popularity during the pandemic as a non-screen activity to do alone or with your family to help pass the time. They make perfect gift ideas for the happy couple.

14. DIY String Heart

Make your friends some fun pillow coverings for their couch pillows. Starting with plain pillowcases, you can either embroider a message (kudos if you have that skill in your arsenal) or paint it using an easy online tutorial like this one from Brit + Co.
Take inspiration from Just Measuring Up with themed labels like the couple’s first snowfall, first Valentine’s Day and first anniversary. You can use the free printable at the website or create your own. Once you’ve printed the tags, hang them on the bottle necks and arrange the wine bottles in a basket.

15. Artsy Pillowcases

Another craft that gained popularity during the pandemic is cross-stitch, a form of embroidery that has been practiced around the world for centuries. If you’ve caught the bug, use your skills to work up a unique wedding gift for the bride and groom (or groom and groom, or bride and bride).
Follow the tips at Fine Gardening to make sure your pots look professional and unique.
Who doesn’t want a shabby chic photo display in their home? Bonus: it’s an inexpensive wedding gift!
Follow the instructions over at Green Wedding Shoes to learn how to make your own string heart. Since string art allows you to create a unique pattern every time, your gift will truly be the only one in existence!
Whether the couple has been living together for years or only just started cohabitating, a DIY welcome mat is a fun and practical wedding gift.

These 3 Credit Cards Are the Best for New Graduates

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Source: credit.com

Gift Aid vs Self Help Aid For College

College tuition can be costly whether you are seeking an undergraduate and graduate degree, attending an out-of-state public university, or taking classes at a private university.

If you do not have adequate savings to pay for classes, room and board, food, travel and other necessities, then you may be considering how to pay for college.

The costs of attending college continue to rise each year for both public and private colleges and universities. The average tuition and fees at a public in-state college was $9,687 and at or private schools it $35,087 for the 2020-21 school year. Obtaining financial aid is one way students can afford to attend college.

One common type of financial aid is called gift aid and typically comes in the form of federal and state grants and a wide range of scholarships that are given by private donors, foundations, non-profit organizations and even the universities themselves.

These grants and scholarships do not have to be paid back, which is helpful for students who are on a tight budget or are considering obtaining a graduate degree.

Another type of aid is called self help aid and usually comes in a form of work study programs and student loans. Some work study programs are sponsored by the federal government and they provide part-time jobs for students who need help paying their tuition. These jobs can be either on the campus of the college or university or off campus nearby.

Self help aid also includes federal student loans which have to be paid back after a student graduates.

There are advantages and disadvantages of both gift aid and self help aid. Undergraduate and graduate students may only qualify for one type of aid, depending on their financial circumstances, where they are obtaining their college degree or other factors.

What Are The Pros and Cons of Gift Aid?

Grants and scholarships are considered gift aid. One common form of grants are called Pell grants. These are grants provided by the federal government and Pell grants are given to undergraduate students who have demonstrated financial need.

The maximum federal Pell grant award is $6,345 for the 2020–21 award year (July 1, 2020, to June 30, 2021), but amounts can change annually.

The main drawback of gift aid is that you may not know what amount you will receive and you may need to supplement paying for college by seeking more scholarships and grants or getting a part-time job.

Federal work study programs are available for both undergraduate and graduate students to help them pay for tuition and other educational costs. The program’s jobs are related to the student’s course of study and also include community service work.

Both full-time or part-time students may qualify for part-time employment while they are enrolled at their university or college and it is available to undergraduate and graduate and professional students who demonstrate financial aid.

The work study programs are operated by a college and university financial aid office and you will receive at least the federal minimum wage. These jobs are available both on-campus and off-campus which can be beneficial for students who do not have other means of transportation.

Students who work off campus typically work for a nonprofit organization or a public agency and the goal of the job is geared to be in the public interest. The number of jobs is limited, so students should apply early to ensure that they have a position for the following academic year.

Federal and Private Student Loans

Another type of self-help aid are federal and private student loans. Federal student loans are based upon the financial need of a student and their family. They are either subsidized or unsubsidized direct loans and may offer lower interest rates than private loans. One drawback is that the federal government will limit how much money you can borrow.

Undergraduate students may qualify for subsidized loans that are given based on their financial need. One benefit is that the federal government will pay the interest on these loans while you are attending school or at least taking classes half-time, during your grace period or when you have deferred the loan.

Both undergraduate and graduate students may qualify for unsubsidized loans and they are not based on financial need. These loans accrue interest while students are taking classes, during the loan’s grace period, or when you have deferred the loan.

Private student loans can be used to help make up the gap in what is needed to pay the remainder of tuition or living expenses. While both federal and private student loans may help students pay for their tuition; they must be repaid once a student graduates.

If you do not complete your course study and do not receive a degree, the student loans still have to be repaid.

Federal student loans have protections that private student loans do not offer. Students who have received federal student loans can seek several options after graduation to repay their loans including income-driven repayment programs.

Federal student loans also offer borrowers’ the ability to put loans in forbearance or deferment, allowing them to temporarily pause payments in certain situations.

Some borrowers will choose to refinance their federal student loans into new private student loans. But this option means that you lose the protection of the federal repayment plans. Private student loans have both fixed and variable interest rates.

Fixed interest rates are beneficial for people who want to know the exact amount of their loans each month helping them to budget more easily. The interest rate on variable student loans are sometimes lower than fixed rates but that means your payment amounts can fluctuate from month to month.

Shopping around can help you find the best private student loan that fits your financial needs and the amount that you can repay each month.

Qualifying For Gift Aid or Self Help Aid?

Qualifying for either gift aid or self help aid might depend on your financial circumstances. Students may want to apply early for grants, scholarships, work-study programs and student loans.

completing a FAFSA®, or Free Application for Federal Student Aid. This application must be completed every year.

Some states and colleges may have their own FAFSA deadlines , so double check to avoid missing any. Missing a deadline can mean forgoing some financial aid.

While some gift aid such as scholarships are given to students based on merit, grades or other accomplishments, grants, work study programs and student loans are typically based on your financial needs and the cost of tuition at your university.

Some universities use data from the FAFSA to determine gift aid like scholarships too. Students can also apply for scholarships and grants that aren’t associated with the FAFSA®.

Private Student Loans with SoFi

In some cases gift aid and federal aid aren’t enough to help students pay for their tuition. In that case, some students may consider private student loans.

SoFi offers private student loans with no late fees or origination fees with flexible repayment options. There are also interest rate discounts for eligible SoFi members.

Interested applicants can find out what rate and terms they could pre-qualify for in just a few minutes. Learn more.



SoFi Student Loan Refinance
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Mint Success: Transitioning from College Kid to Young Professional

Photo Credit: Lawrence Peart

“Mint is so crucial to my personal finance I honestly have no idea where I would be without it.” That’s what Austin, TX photography consultant Lawrence Peart says when reflecting about his transition from college student to young pro, financially speaking. His experience so far shows that it is possible to graduate from college without debt, and to adjust to the higher cost of living as a young professional, while also saving money for your future.

But Peart stands out from the crowd. We looked at Minters’ numbers to see how college students and recent graduates use their money or handle debt, and found that there’s a big shift in many categories from ages 18 to 25 – incomes increase, spending categories fluctuate, and debt repayment – well, you know how that goes. Student loan payback time for many!

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College Grads Make More Money…

Depending on the field that graduates enter, incomes can be across the board, but a majority of our Mint users in that age range earn between $25K and $50K annually.

Student ChartGraduate Chart

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…and Spend More Money!

The newfound earnings may seem like a lot of money to a recent grad but, when faced with the sticker shock of life outside school, the typical Mint user experiences an accompanying increase in spending on rent, entertainment, and education related expenses – mostly student loan repayment. That bill averages about $300 per month.

Most grads continue to use credit cards after graduation. In fact, their card charges increase from $1,200 to $1,900 on average. But most of them don’t pay finance charges, which means these savvy Mint users are the ones who pay their balances by the end of the month. This explains why Mint’s young users have an average credit score of 690, considerably higher than the national average of 630 for the same age group*.

Good work, Minters! But while you’re paying off your college debt and adjusting to life on the outside, don’t forget to save for your future. Only 2% of college students have significant long-term savings, and that number only goes up to 7% among college graduates 25 and under. It might seem daunting to set aside those crucial dollars, but that money will grow over time and make your older self thank your younger self.

Moving Forward

Peart is in that 7% – he follows the mantra “Save, invest early and often, reap the benefits later.” With a goal to live debt-free and retire in his 20’s (he just turned 26), Lawrence uses Mint to budget and find extra money to sock away for the future. While his income falls in the same range as the majority of recently graduated Mint users, his experience both during school and in the few years since graduation defies many of the statistics, so naturally we asked him all about it.

What kind of shift in spending did you experience between college and post-college life?

I think it might surprise most people to hear that I spend far less money now than I did in college. Once you start earning an actual income and developing a clearer sense of your relationship to money it becomes much easier to save, and feels more rewarding to do so. While in school I never had much cash, so in a way it had less value and I spent it more freely. You expect to be broke in college, which becomes a self-fulfilling prophecy, and unless you’re careful that can then extend past your college years into your working life. I even had a little saying for it: the closer I am to zero, the less I have to lose.

The average college graduate spends about $300 per month on student loan repayment. What’s your bill?

$0. My experience paying for college was a mixture of some good fortune, a little bit of privilege, and tons of hard work. I chose a public school in a reasonably cheap city, I received decent grants, I applied for every scholarship available to me every semester (and made sure I had the grades to qualify) and for all but my sophomore year I worked at least part-time to have a source of income. I graduated broke, sure, and maybe missed out on some fun things here and there, but at least I didn’t owe anything.

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What was the most shocking financial realization you experienced once you left college?

That you can save quite a bit of money not doing the stuff everyone seems to think you have to be doing. If you don’t buy fancy clothes, go out for drinks every day, feel the need to keep up with the newest phone every 6 months etc., all of that extra cash starts to add up.

What are your thoughts about retirement savings, and what do you practice?

I half-seriously tell myself that I want to retire in my 20’s. I don’t mean “retire” in the way most people would think of retirement, I always want to be creating and applying myself to something, but I’d like to have the ability to not work for long periods of time. To be able to wake up one day in the near future and say “I am comfortable not working the rest of the month, time do something creative” and not feel guilty about it. That’s the goal.

I set up a Roth IRA almost immediately upon getting sustained income and contribute the full amount each year into basic low-cost index funds. I admire my parents in a lot of ways and don’t question their decisions and what life events influenced them, but while they are both doing fine in retirement age they are doing so without any long-term retirement account holdings. It might be hard to imagine 40 years down the line, but the math regarding investing when you’re young is compelling.

How does Mint help you stay on track?

I worked for about nine months before I came across Mint, and even though I thought I was being good with my money, you truly have no idea until you see it categorized and laid out in front of you. Those little purchases each day, the subscriptions, the monthly payments, it all adds up fast. You might think you’re saving money, but you’re not. It really does take hard work. Mint makes it easy, and I’ll tell everyone who listens: it’s even made paying bills fun. The first week of each new month is like Christmas. I get paid, I pay off my recurring expenses and then allocate how much I want to save that month before organizing more flexible costs like groceries, entertainment, etc. I follow one maxim above all else: you don’t save what is left after spending, you spend what is left after saving.

You can be like Lawrence

Does the idea of watching the savings pile up get you excited? Try setting up a goal with your Mint account and making that progress bar move!Don't save what you don't spend - spend what you don't save
We would like to hear your story! Contact us at Editor_Mint@intuit.com with “Mint User Story” in the subject.

Kim Tracy Prince is a Los Angeles-based writer who is pretty jealous of Lawrence’s early progress. It took her many years to pay off her student loans. She celebrated by finally framing her diploma.

*Source: https://www.creditkarma.com/trends/age
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Source: mint.intuit.com