Understanding Student Loans

Student Loans are Complicated

That’s why cuLearn is here to break things down and answer your questions – every step of the way – with advisors, resources, and tools that help you effectively plan and pay for college. And in working with cuLearn, you can rest assured knowing that we will help you find the right loan – not a dollar more, not a cent less – so that you can focus on the future and avoid unnecessary debt.

Info And Advice

The Basics

In most cases, it’s best to follow this strategy when it comes to paying for college. Use:

  • Free money first: Grants, scholarships and other options that don’t require repayment.
  • Federal student loans second: These are low-interest, fixed-rate loans made with government funding.
  • Private student loans last: And only if Nos. 1 and 2 above don’t provide enough money to cover expenses of your school.

Getting a Private Student Loan

How to choose a loan that’s right for you

1.  Complete the FAFSA: Every student should complete the Free Application for Federal Student Aid (FAFSA). Why?

  • Most schools require this form. It’s what college financial aid officers need to create your financial aid package.
  • It’s how you apply for federal student loans and grants from your federal and state governments.

Visit FAFSA.gov to begin your application.

2.  Review your financial award letter: The school(s) included on your FAFSA will send you a financial aid award letter detailing the costs of attending the school as well as any grants, scholarships, work-study or loans you’re eligible to receive for the current academic year. 

3.  Explore federal student loan options: A federal loan is typically the best option to start with. Federal student loans are funded by the federal government and do not require a credit evaluation for approval (like private student loans do). Federal loans also typically have more generous benefits than loans offered by private institutions, such as income-based repayment and loan forgiveness.

4.  Consider a private student loan: These loans are offered directly through banks, credit unions and other financial institutions. To obtain a private loan, you apply directly to the lender and  not through the FAFSA process.

Read: Private Student Loan FAQs

Options and Processes

What to do if You Need a Student Loan

If you need student loans to pay for college – and most students do – it’s important to understand your options. Student loans are an investment in your future, but be smart about borrowing only what you need.

These quick notes can help you do your homework before taking out a loan:

Use federal student loans first

In nearly every case, students should take advantage of federal student loans before applying for a private loan. One reason: federal loans come with mandatory borrower protections that are generally not offered by private lenders.

The U.S. Department of Education offers a variety of federal student loans that are funded with government money:

  • Direct Subsidized Loans: Available to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school.

  • Direct Unsubsidized Loans: Available to eligible undergraduate, graduate and professional students. The student does not have to demonstrate financial need to be eligible.

When to consider a private student loan

If all other sources fall short of what you actually need to pay for your school, consider a private student loan to help you fill the funding gap. With cuLearn and our lender partners, private student loans are meant to complement federal student loans and other financial aid, not as a primary source of funding for your education. With private loans, each lender’s loans are different, and your eligibility and interest rate typically depend on your credit history.

Try: Find a Lender Tool

Before You Apply

Be sure to shop around and compare your options. Interest rates, terms, conditions and other factors vary from lender to lender. Ask questions, like:

  • What will my monthly payments be?
  • What is the total cost of the loan?
  • What are the repayment options?

How to Apply for a Student Loan

  • Federal student loans: To apply, complete the Free Application for Federal Student Aid (FAFSA).
  • Private student loans: To apply, consult the bank, credit union, or other lender directly. While all offer private student loans, member-owned credit unions may offer lower rates and fewer fees than for-profit banks.

Debt Repayment Options

Loan Consolidation and Refinancing Basics

“Consolidation” and “refinancing” are financial terms, so let’s cut to the basics.

  • Consolidation: Consolidation refers to the federal Direct Consolidation Loan program, which allows you to take multiple federal student loans and combine them into a single loan. This is mainly for convenience so you have just one payment each month. If you have different interest rates, your loans will be combined to a fixed interest rate of the  weighted average of your existing federal student loans, rounded up to the nearest one-eighth of one percent.
  • Refinancing: Refinancing refers to the process of obtaining a new loan, potentially with a better interest rate or repayment terms, to pay off your existing loans. Similar to loan consolidation, refinancing can result in one convenient monthly payment.  

Quick Comparison

To help you decide which option is right for you, here are some of the great and not-so-great features of consolidation and refinancing.

What it does:

Consolidation: Direct Loan Consolidation combines your multiple federal loans into one new federal loan so you have just one monthly payment.

Refinancing: Typically, lenders pay off your multiple existing loans with one new loan, so you’ll have just one monthly payment. While some lenders may refer to this as “consolidating” your loans, refinancing typically pays off your existing loans, it does not combine them into a new loan.

What loans it works on:

Consolidation: Federal student loans only

Refinancing: Federal student loans, private student loans or a combination of the two

How it affects your interest rate:

Consolidation: Direct Loan Consolidation simply combines your existing federal loans into one--the resulting interest rate is a weighted average of your existing loans and therefore your interest rate will not decrease.  

Refinancing: You can often find a lower interest rate than what you’re paying on your current loans

Potential savings:

Consolidation: Direct Loan Consolidation is generally for convenience and, because your interest rate does not decrease, it won’t save you money.

Refinancing: You can save money where your refinancing lender is offering an interest rate that is lower than what you are currently paying on your loan(s). Note that the rates private lenders offer typically vary according to your credit rating and other information, such as employment.

Read: Debt Repayment FAQs

Helpful Tools

Refi Calculator

See an estimate of how much you can save on your payments by refinancing your current student loans.

Try: Refi Calculator

Planning Calendar

Getting ready for college?  There’s a lot to think about and a lot to remember. That’s where we can help!  Our Planning Calendar will help you plan and get ready for college without missing any critical steps. 

Try: Planning Calendar

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