How Applying for a Student Loan Feels Different These Days

Mini graduation cap on rolled up cash.

Parents and students will agree that there’s an increased sense of uncertainty today when it comes to pursuing higher education plans. Even those who have set aside college funds for their children might now be dealing with unemployment, and so now must seriously look into available higher education loan opportunities.

Different kinds of financial aid, from scholarships to loans, can be sought out to help students increase their chances of securing funds to secure their educational future. As with any other types of loans, there’s going to be a stringent application process you’ll need to get through first before approval. To apply for a student loan, forms will need to be filled up, and requirements will need to be sent. In other words, there’s a lot of information gathering and data collecting that will occur.

Student Loans Then and Now

Before diving into those specifics, let’s first take a look at what you can expect in today’s student loan landscape. Perhaps the first thing you need to know about student loans is that you’re not the only one interested in applying for it. As a matter of fact, there is over $1.64 trillion worth of student loan debt in 2019, $1.515 trillion of which come in the form of federal loans, while the other $124.65 billion comes from private funding, according to the December 2019 data from the Department of Education.

These numbers are staggering. And give you an idea of just how much clamor there is for it in the country. And these numbers keep growing every year.

We were still only dealing with billions back then, and now it’s in trillions. It only took a full decade to double that amount in billions to trillions today! Can you imagine how much more it’s going to be in the next decade?

The Rise in Student Loans

As more people seek out higher education, whether in college or post-graduate studies, the more student loan opportunities—and rates—go higher. There are a variety of reasons for this.

One is that the cost of schooling itself increases every year. Colleges and universities may justify these tuition fee increases with improvements in faculty, facilities, and curriculum. Of course, they would want to reassure you that you’ll be getting your money’s worth if you do decide to come to their institution.

Another thing you should know before you apply for a student loan is that you can expect an average of $35,397 student loans per person. So if you’re planning to take out a loan, it would be great if you could also have a reasonable expectation of where you’re going to get funding to repay the loan. After all, student loans aren’t simply offered on principal amount; there are interests and possibly other add-on rates that may be attached to it.

Simply put, it’s definitely a long-term commitment that you would do very well to prepare well for and take seriously.

Understandably, the idea of taking out a student loan today, especially in this very uncertain economic climate, is nerve-wracking. However, from then and now, student loans have proven to be a reliable option to help you pursue your life goals by way of completing your education.

How to Be Smart about Student Loans

Taking out student loans is a serious responsibility, yes. But with proper management, it is possible to prevent it from overwhelming your life or drowning you in debt for many years to come. Here are some of the first steps and considerations you need to take if you are planning to apply for a student loan.

Set A Budget

How can you set a budget when you don’t know how much loan amount will be offered to you? The answer is simple: list down your options for colleges and universities and see how much they cost. Doing this should give you an idea of the range of costs you should aim for when you take out a loan.

The cost of tuition will depend on how prestigious and exclusive the institution is. Ivy league schools are definitely going to require a lot more in terms of finances. Smaller private institutions, like art universities, also tend to be in the higher range of tuition costs because of the perception of exclusivity attached to it.

Other more “regular” colleges and universities may cost a little less. But don’t take it to mean that it’s going to be so much more affordable. Whichever option you take, it’s still going to cost a serious amount of money. You’re talking about funding for your entire four years (at the minimum!) of your degree, after all.

This is also why it’s crucial for you to think very hard about what course you’re pursuing before you apply for a student loan. Is this something that you could build and grow into as a serious career, or is this something more of an interest elevated to a higher level? How marketable are the skills that you can have in this degree you want to earn? What is the job market like upon your graduation? Does your area of study allow you to pivot to a different career path seamlessly in case you need to?

Make a Good Plan

We know, it’s definitely a lot to think about. But you have, because remember, once you take out the loan, it’s your responsibility to pay it back. Therefore, whatever it is that you’re using it for, you should at least try and make sure that your next steps in the future, upon graduation, are going to be helpful to you in bearing this responsibility.

As you’ve seen in today’s world, there is no guarantee for success, that much is true. But also, preparation really is key to make your future just a little bit more secure. So you don’t let financial obligations like student loans take over your life. At the very least, you can try.

It is highly advisable that in your search for the best-suited loan offer for your needs, you prepare the basic document requirements as well. You might also want to make duplicates of these documents, especially if you intend to make multiple applications.

Approaching Student Loans

Student loans can be terribly intimidating, we know that as much. The sheer amount of money involved in the conversation is enough to send a first-time student loaner tossing and turning at night.

When taking steps to apply for student loans, regardless if it’s your first time or not, it’s always good to take a comprehensive look at what awaits you in the deal. Know what are the moving parts in taking out a student loan.

The requirements for a student loan application will depend on what type of loan you are seeking out. At the most basic, however, you will need your social security details, proof of residency, and good credit standing. In some instances, you may be required to have a co-signer, such as your parents, especially if your credit history is not sufficient enough for a loan as big as a student loan.

How much money you will be offered rests on different standards. The lender might look at the school that you’re interested in, and compare that with how much of the costs you can actually afford to shoulder on your own. Family income, average living costs, outstanding loans, and credit history are among the basic information that the lenders will be most interested in.

Interest rates for student loans are compounding. This means that for every year you have an outstanding loan with your lending institution, the total cost of what you will pay them increases. Generally speaking, the sooner you pay off your student loan, the lower the interest rate you’ll have to deal with.

As a tip, don’t be lured in by easy promises of huge money to fund your education. Always read the fine print and make sure you’ve studied the terms and conditions before signing on the dotted line. If the process seems too easy and too good to be true, then that’s probably because it is.

That’s why you should really take the time to study your options and compare the different offers out there. If there’s one major change you can be grateful for a decade ago, it’s that information and fact-checking is a lot easier now, thanks to the internet. Put in the work for research so you can come up with a well-informed decision. Your future literally depends on it.

Types of Loans

Ideally, this should be your first choice should you decide to take out a loan. That’s because federal loans tend to have good offers with lower and more reasonable terms. Plus, federal loans do allow for student loan forgiveness in the future, assuming that you meet their criteria.

Subsidized loans ease much of the financial burden on you because it is the Department of Education that pays for the interest of your loan for at least half the time you’re in school. They also will continue support for the first six months after your graduation, and then also during a deferment period.

What you have to remember about federal loans, however, is that the school will be the one to determine how much you should get. That, plus the fact that there is a cap on how much you can loan. Whether you get subsidized or unsubsidized loans.

This type of loan is specifically for parents who would like to support their dependent children in their students. Direct Plus Loans will require a credit check, and the offer will mostly depend on the parent’s credit history. The interest rates also tend to be a little bit higher than federal loans, although there are choices for repayment that can suit the needs of the borrower

Private loans are offered by financial institutions like banks. Therefore, taking out a student loan through private lenders should more or less have the same process as with any other type of loan.

They will do a hard check on your credit history to verify your eligibility. And again might need to require a co-signer. You must clearly identify who the primary lender will be. In this case: is it going to be or your parents?

Private loans also do offer a variety of options for loan repayment. Do you think you can manage a monthly schedule? Which will start running as soon as the funds are released to your account. Or would you rather defer the payments until after you’ve graduated? Each choice will have its pros and cons so make sure to think about it hard.

When you apply for private loans, you’ll also be the one to identify first how much you think you’ll need. You can justify your application by saying it’s for student loan housing on top of tuition and other additional costs. The lender will determine if your justification is good enough. And most importantly, if your credit standing is good enough to give the amount you asked for. Be prepared to be offered a different amount, and one that’s less than what you’re hoping to get.

When you apply for a student loan, the most important thing you have to watch out for in private loans is the interest rates. They tend to give out the highest interest rates among the different types of loans you can avail of in this list.

Private vs federal loans

Final Thoughts

Ultimately, however, while there may have been many changes in the landscape of student loans in the past decade, what remains is the fact that it is a crucial part of pursuing your dreams.

True, there are many reasons to be scared and unsure in these times. But there are also plenty of helpful resources you can use to help you feel in better control of your future. Before you apply for a student loan, study your personal loan options. Take a deep look at the considerations, and base your decision on established data and factual information. Then you’ll find taking out a student loan today does not need to be as scary as you think it is.

Loanry

We Did The Homework on the Top 7 Student Loan Lenders

College tuition fees are very high, and they are increasing almost every year. Over the last decade, public universities have seen a jump in tuition prices of 35%. Unless your parents can afford to outright pay for your college tuition fees, then you may have to consider a higher education loan from student loan lenders for assistance.

What You Need to Know About Finding Student Loan Lenders

Once you have exhausted your other resources, such as using your own savings and getting federal student aid, you still may need some additional support. At this point, it is time to consider finding student loan lenders. To make your search easier, you can use a student loan locator. When searching and deciding between student loan lenders, you should keep these tips in mind:

  • You can not choose your own student loan lender for federal student loans.
    On the other hand, if you are searching for private student loan lenders, then the decision is completely up to you. While this can take some time and effort, it means that you can make an informed decision, based on the advice below, in order to get the best student loan lenders for you.
  • Compare fees and interest rates.
    The fees and interest rates can vary greatly between different student loan lenders, so it is important to compare the rates of multiple student loan lenders before making your decision. There are many possible fees to look out for, including origination fees, early payment fees, and even lender costs.
  • Check your credit score before searching for student loan lenders.
    Your credit score could have an impact on whether or not you are able to get a student loan and at what rates. By checking out what your credit score is before searching for and comparing student loan lenders, you can find out the possible impact of your credit score on your student loan options and give yourself a more realistic idea of what kind of rates to expect.

Top 7 Private Student Loan Lenders

Not all student loan lenders are equal. If you want to make sure you only consider more trustful student loan lenders, then check out our list of top 7 student loan lenders. At a minimum, you need to make sure your provider is legitimate and not a scam.

1. Citizens Bank

Citizens Bank offers both fixed-rate and variable-rate private student loans for both undergraduate and graduate education, and students or parents are eligible to either borrow or refinance loans through the bank.Loan terms range from 5 – 15 years, and borrowers may take out between $1,000 and $295,000. You can borrow a total of $350,000 for some degree types, but this amount includes a combination of private and federal loans. If you are eligible, you can save money by not paying for application, origination, or disbursement fees, and you can also get loyalty and autopay discounts. There is an option of either making regular or interest-only payments while in school, and co-signers may be released after 36 consecutive on-time payments. Citizens Bank has an A+ rating from the Better Business Bureau.

  • Loan Amount: $1,000 to $295,000, depending on degree type and the amount you borrow in federal loans.
  • Interest: 3.48% – 10.78%
  • Terms: 5 – 15 years. You can refinance student loans with Citizens Bank for up to 20 years with interest rates as low as 1.99%.

2. Sallie Mae

Sallie Mae is a popular choice for private student loans. With low fixed and variable rates for undergraduates, Sallie Mae also has no origination fees or pre-payment penalties. One reason Sallie Mae loans are popular is that borrowers enjoy the flexibility with repayment terms, and unlike most lenders, Sallie Mae allows part-time students to take out loans.  A student or parent can apply for a loan and get a result in about 15 minutes. Borrowers can take out enough funds to cover any expenses associated with school-certified expenses, such as tuition, books, meals, travel, and even a laptop. Sallie Mae also has specialized graduate loans, including ones for bar study, law school, and dental and medical residency. International students may take out a student loan with a qualified U.S. co-signer.

  • Loan Amount: $1,000 up to the total cost of college attendance.
  • Interest: Undergraduate variable rates as low as 1.13% and fixed rates as low as 3.50%. Graduate variable rates as low as 2.12% and fixed rates as low as 4.75%
  • Terms: 5 – 20 years

3. College Ave

Another lender with a simple application, College Ave allows qualified parents and students to take out loans for undergraduate and graduate studies, including refinancing options. While there are no application or origination fees, College Ave does charge late fees of either 5% of the payment or $25, whichever is less, for any payment not received within 15 days of the due date. There are no limits beyond the borrower’s own creditworthiness, and loans can range from between $1,000 to 100% of the school-associated expenses. Co-signers can get a release after 24 months of consecutive on-time payments, not counting forbearance or deferment periods. Any deferment or forbearance situation is decided case by case.

  • Loan Amount: $1,000 up to the full yearly cost of attendance.
  • Interest: Variable interest rates as low as 0.94% up to 12%. Fixed as low as 3.24% up to 13%.
  • Terms: 5 – 15 years

4. Discover

Borrowers using Discover may qualify for both current and future loans with the multi-year option, meaning they can focus on their studies instead of worrying about whether they will be able to find a good loan in the following years. The multi-year process is simple and does not have an adverse effect on your credit score, and as long as you stay at the same school and pass a credit review you will continue to qualify for the same rate. There are no application, origination, or late fees, and loan specialists are available at any time to help with questions or problems. One thing Discover offers that is very unusual is a cash reward for good grades, equal to 1% of the loan amount. Anyone who earns the reward only has to log in within 6 months and claim it.

  • Loan Amount: $1,000 up to the full cost of attendance, minus any other amount you receive in aid.
  • Interest: Variable rates range from 1.79% – 11.09%. Fixed rates from 3.99% – 11.59%.
  • Terms: 15 – 20 years for a new loan, depending on the degree. 10-20 years for student loan consolidation.

5. Earnest

Earnest is a great lender because of their low rates and lack of fees. Repayment terms are flexible, the application is fast and easy, and you can get a quote in as little as two or three minutes. As a private lender, Earnest has some extra incentives, such as a 9-month grace period and the ability to choose to skip a payment once a year. During the grace period, interest will start to accumulate, so borrowers have the option of making payments on the interest before the repayment period starts. The 9 month grace period is only available if you are not making payments while in school.

The minimum loan is $1,000, but there is no upper limit as long as the borrower qualifies. Single borrowers have 5 to 7 years to pay back the loan, but borrowers with a co-signer have between 5 and 15 years to pay back a loan. Unlike other lenders, Earnest requires borrowers to have at least 3 years of credit history, a minimum FICO score of 650, and a minimum annual income of at least $35,000.

  • Loan Amount: $1,000 up to the full cost of yearly attendance.
  • Interest: Variable rates as low as 0.94%. Fixed rates as low as 2.99%.
  • Terms: Typically 5 – 15 years. Can be extended up to 30 years under some circumstances.

6. Education Loan Finance

The unique thing Education Loan Finance offers is a referral bonus. All borrowers need to do to collect on the bonus is sign up for a referral link, share the link with friends through email and social media, and collect $400 for each friend that refinances through ELFI. The friend gets $100 toward the principal balance of their new loan. ELFI has higher standards than many student loan lenders and expects borrowers to have at least 36 months of financial history, a $35,000 per year income, and a credit score of at least 680. Students can borrow money if they are enrolled at least half-time. Every applicant at ELFI is assigned a Personal Loan Advisor, in order to help with the process and with any questions or problems.

  • Loan Amount: $1,000 up to full qualified amount of expenses.
  • Interest: Variable rates as low as 1.20%. Fixed rates as low as 3.20%.
  • Terms: 5 – 15 years. Parent loans offer 5 – 10 year terms.

7. MPOWER

MPOWER is a student loan lender designed by international students for international students. While other private lenders have more strenuous requirements, MPOWER Financing is one of the best lenders for borrowers with no credit history. Loan amounts range from $2,000 to $50,000, and borrowers have 10 years to pay back the loans. While there is no application fee, MPOWER does charge a 0.5% origination fee, although it is added to the balance of the loan and can be paid off over time. MPOWER offers several discounts, including autopay, on-time payment, and proof of employment and graduation. Borrowers don’t need to worry about co-signers because the process was set up so students wouldn’t have to worry about their credit history or score.

  • Loan Amount: $2,001 – $50,000 per loan. Maximum is $100,000 total.
  • Interest: Typically 11.99%, but you can earn up to 1.50% off of interest with automatic payments, 6 months of on-time payments, and more.
  • Terms: 10 year repayment term.

Loanry is here to help you with everything you need concerning student loans. We not only provide hundreds of informative articles on various financial topics for free, we also help you connect with the best lenders out there.

What You Need to Know About Saving Money on Your Student Loans

It is possible to save money on your student loans. While owing tens of thousands of dollars to student loan lenders is not uncommon, it is also not encouraged to take out more than you need. Many students just blindly accept the full loan amount when they get an offer from student loan lenders, but this is not required. You can choose how much you take, based on how much you really need. By not taking the full amount, you will save yourself from paying back interest later on the money you took and didn’t really need.

Besides just borrowing smart — by only borrowing what you need, you could also save money on your student loans and borrow less money by saving money before college starts. If you are only looking into student aid options when you are applying for college, then it may be too late, but if you are planning ahead, then you could save yourself from borrowing at least a fraction of your education expenses. You could get a job while in high school and save most of the money you make, as well as save any money you get as a gift for your birthday or Christmas. You and your parents can take advantage of programs like Ascensus College Savings that allow you to save money toward your education on purchases you make anyway, such as for gas or groceries both before and during college.

What You Need to Know About FAFSA

If you have been filling out college applications, then you have probably seen the acronym FAFSA. You may not have known what it stands for though: “Free Application for Federal Student Aid”. If you need assistance paying for college tuition, then filling out the FAFSA should be your first step. You should get a better understanding of the FAFSA and how it could possibly help you decrease the overall amount you need to borrow from student loan lenders. Filling out the FAFSA is the prerequisite to receiving any kind of federal financial aid, including:

Grants are a great option of federal financial aid because they are basically an offer of free money. They typically do not have to be repaid, unless you withdraw from school and owe a refund or if you do not complete your service requirement, which applies if you receive the Teacher Education Assistance for College and Higher Education (TEACH) Grant. There are many types of federal grants available, but one of the most common is the Pell Grant. You may qualify for a Pell Grant if you can prove you have financial need and if you have not yet received your Bachelor’s degree.

Scholarships are also a form of free money. They can come from a range of places, but one way to get scholarships is through the federal government. You could also find other scholarships, whether for academic merit — if you got good grades in high school, talent — if you play sports well, or for your particular area of study. Just be careful to avoid student loan scams when applying for outside scholarships. Your high school can help you find places to look for scholarships.

Loans are not free money. They are borrowing money, which you will later have to pay back, with interest. While it can be overwhelming to pay back your student loans, with interest, there are several repayment plans you can choose from. There are four types of direct loans to choose from, including direct subsidized loans, direct unsubsidized loans, direct PLUS loans, and direct consolidation loans.

Work-study jobs are made available through the Federal Work-Study Program. These jobs are a great way to earn some extra money for education expenses while in school, through part-time work. Getting work-study financial aid allows you to sometimes find a student job more easily since the money is funded by the government, so whoever you work for does not have to pay as much themselves. This is a great option, since you can work either on or off campus, though working on campus oftentimes means more flexible work hours, which will help you to fit in work around your academics.

Federal student aid isn’t your only option. You could also get aid from your state government or even from your college or university. Plus, don’t miss out on tax benefits for higher education, including tax credits for higher education expenses and student loan interest deduction.

Conclusion

Before searching for a student loan, make sure you do your homework. Knowing the statistics of student loans in the US and understanding the benefits of filling out your FAFSA and turning it in on time can help you make a more informed decision when choosing your student loan lender. Do not choose the first student loan lender you find, but rather shop around to find the best student loan lender for your situation. If you have any questions, many student loan lenders are more than willing to answer and help you, so don’t hesitate to ask!

Loanry

How to Avoid Common Student Loan Scams

Worried graduate student shaking a piggybank isolated on white background.

Student loan debt is extremely high and is a major topic of conversation. With financial topics like these, they tend to be the target of scammers. At least three out of five people have received a phone call from an illegitimate company that claims they are the solution to your higher education loan debt.

Sadly, due to desperation, fear, and other emotions, many borrowers fall for the tactics of these scammers. Don’t be one of them. Below, we are going to discuss common student loan scams, how to spot them, and how to protect yourself from them.

How to Recognize and Avoid Student Loan Scams

When looking for a lender, you need to be very careful and do your research. Make sure you are choosing the best option for you. You can always look for help here, on Loanry!

Pay full attention if you want to sign up for a student loan or maybe for a personal loan for students. These are some of the most common signs of fraud that have been detected up to this point:

Upfront Fees and Monthly Fees

Most student loan scams will require that you pay upfront fees for their services or monthly fees. You will likely hear this a couple of times through this article, but it is important. Charging a fee for services does not automatically point to a scam. However, it is against the law for any debt relief help to charge fees before getting your results. There should be no upfront fees for the service at all, so if someone is trying to charge you before they do anything, run the other way.

As far as monthly fees go, they are not necessary. Understand something: You do not have to pay to receive grants or scholarships. Even if you get private student loans, you do not have to pay upfront. You also do not have to pay for things like:

  • Filling out the FAFSA
  • Changing your repayment plan or payment amount
  • Loan consolidation
  • Deferred payments
  • Loan forgiveness or other government programs

Every bit of those things is free of charge. Occasionally, scholarship providers may require an application fee. This is not necessarily unusual or a scam. If you are trying to apply for one that does ask for a fee, look into the scholarship first. Your school should be able to help you do this. A simple Google search can usually find pertinent information as well.

As far as any current student loans go, you can handle any business you need to directly with the loan service provider. My student loan service provider has an excellent website- as most of them do. I have the ability to change my payment plans, apply for an income-driven repayment plan or other plans, and more. I even have the ability to choose which of my loans get my payment if I want to pay a different one than the one they have placed as first in line.

And if I have any questions, I can contact them directly through the website- no middle man required. Don’t pay for something that you can do yourself for free. And do not be fooled into thinking you cannot do it yourself. Take a look at StudentLoans.gov, too, for anything related to federal student loans.

Aggressive Sales Tactics and Urgency

Everyone I know has experienced the tactics of a salesperson. They push and push and push to get you to buy. They make you fear missing out on a deal so you hurry and sign up immediately. The harder they push, the more you know that their paycheck probably relies on the commission from your purchase.

Unfortunately, student loan scams tend to be worked by experienced salespeople. They know what to do to push you into a decision you probably would not make otherwise. If you feel pressured to sign up, take a step back, and look into the company.

Tips for Avoiding Student Loan Scams

Improper Grammar and Spelling

Grammar and spelling mistakes are not all that odd. It is easy to accidentally press a “T” instead of an “R” on your keyboard, or something similar. It is also not unusual to get so caught up in your writing that you type “your” when you mean to type “you’re”.

While everyone can make an occasional spelling or grammar mistake, many communications from companies that pull student loan scams contain a good deal of them. It is not always the number of errors, though. Sometimes it is the errors themselves. Unusual errors are a good sign that the company is fraudulent.

Most legitimate companies have fewer errors. This is because many of them have a spell check program on their computers. They also tend to actually double-check their work.

Don’t get me wrong- bad communication does not necessarily mean that it is one of the student loan scams. Even those of us who write for a living like me make mistakes and do not always catch them. These mistakes are more of a red flag than a full stop sign. If you receive a communication like this, take a beat and check into the company.

Asking for Authorization

A lot of companies committing student loan scams ask for things that they have no business asking for, such as your social security number, your FSA ID, your sign-in information on your loan service provider websites, or even for you to sign a power of attorney agreement giving them the power to “negotiate” your accounts. Please pay attention: No legitimate source of student loan help will ask you for any of that information. If you give these scammers any of that information, you could end up in a lot of financial trouble. You absolutely never know what they will do with it.

If messing up your finances is not scary enough, think about all of the information that your student loan service providers have: Your identifying information, any income verification you turn in, family information, your home address, your telephone number, credit card information, and more. They can use this to steal your identity, clean out your bank account or credit accounts, and more. And, let’s just be honest, there are stalkers and others out there who might use your home address for other reasons. So, do not give out this information.

Steps to Determine if a Website is Fake

The Threat of Legal Action

Have you ever received one of those phone calls that tell you if you do not take immediate action that day, a law enforcement officer will be at your house that afternoon? I have, and the first time, I was scared to death. Fortunately, I had missed the live call and heard this threat on my voicemail, so I did not have to respond to a person immediately.

Instead, I searched my brain for anything that would warrant such action and finally called a friend to share my fear. Turns out, she had just experienced something similar and told me that it was a scam. After no law enforcement officer showed up at my house that afternoon- or any afternoon thereafter- I realized that she was right.

People that scam others play on their emotions. One of those emotions is most definitely fear. If they can make you afraid enough to believe that you will be in jail, there is a good chance you will do what they ask. Let’s alleviate some fears, shall we?

I cannot think of one single civil or consumer debt that you can be jailed for in America. If any debts can put you in jail, it is those such as unpaid taxes or unpaid child support. However, even those do not typically put you in jail automatically. There are court proceedings and warnings and a process.

Additionally, you do not get phone calls for stuff like that- unless it is from a lawyer you hired. Courthouses do not call. They send out official letters, usually dropped off by an official delivery person or process server.

Other debts, however, like credit cards, loans, and such do not put you in jail. They can ruin your life in ways like keeping you from getting credit, buying a home or car, getting good interest rates, and possibly even getting certain jobs. Imprisonment is a totally different story.

Affiliations

A lot of companies running student loan scams will claim to be affiliated with the Department of Education. While the Department of Ed does work with some companies, most companies that claim an affiliation are lying. You can look at the Department of Ed’s website to see what trusted companies they work with, but remember, you are not required to pay for help with student loans. If someone is trying to charge you, know that you have many free options.

Common Student Loan Scams

The number of student loan scams in play will likely continue to grow over time. And they will probably get more and more creative. Don’t let them fool you and don’t think that you will save money on your student loan with their loan options. For now, though, there are some common ones to look out for:

A Stop in Your Loan Forgiveness

Scammers use fear and urgency to get results. If someone calls you or sends you a notice that your loan forgiveness is about to end, ignore it unless it is straight from the Department of Education or your loan service provider. If there really is going to be a change, one or both of these two organizations will send you an official notice.

Additionally, even if the government decides to make changes, it will not happen overnight. Things like that take time to move through all parties that must agree on them. It also takes time for things to be put in place. So, if there is going to be a change, you will know about it way ahead of time- not a few days or a few weeks beforehand.

Total Loan Forgiveness

One of the most common student loan scams is when companies offer total or fast loan forgiveness. There are a couple of things for you to know here. First, only special circumstances can completely discharge your student loans. This tends to be things like:

  • Death– and no one wants to die to avoid student loan debt
  • Disability– not a temporary disability but extreme and permanent disability
  • Bankruptcy– in some very, very rare circumstances
  • Public Service Loan Forgiveness and Teacher Loan Forgiveness– for borrowers who work in certain job types for a specified amount of time

The second thing to know is that none of these circumstances can get your loans discharged quickly. They all require a certain process and can take up to years to work fully. Companies claiming that they can do this for you are committing student loan scams- stay away from them. If you feel that you qualify for student loan forgiveness, you can speak to your loan service provider about it.

Loan Repayment or Loan Debt Relief

If a company claims that they can settle your debt for lower than anyone else or that they can get you a special deal, it is not true. While debt relief companies can help you settle your debts for lower than the original amount, they cannot get better results than you or any other company can. If you choose to use a debt relief company, that is up to you. However, do not hire a company over because of an untrue guarantee.

Taxes

The Better Business Bureau warns of another of the popular student loan scams: Federal student tax. Scammers call unsuspecting borrowers claiming to be IRS agents or even FBI agents saying that they owe a federal student tax. This scares borrowers into paying these scammers to stay out of legal trouble. Here is what you need to know:

  • There is no such thing as a “federal student tax”. This is a completely made-up term
  • If you owe the IRS for anything, you will receive an official notice- not a phone call
  • The FBI does not collect debts, and they certainly will not call you asking for money to do such. If any legitimate agency needs to contact you, they will send official notices or show up at your door with official badges. Even then, you can make calls to verify their identity. The FBI is no stranger to scammers, so the legitimate organization will have no issue with you verifying someone’s identity. But again, they are not debt collectors, so if someone shows up or calls about your debt, hang up or shut the door

Reduce Your Risk of Being Scammed

  • Only apply for student aid on the official FAFSA website to prevent illegitimate sites from intercepting your information. After completing the application, completely close out of your browser.
  • Your FSA ID and your login information are for you and you alone. Do not give them out to anyone. Remember, legitimate sources will not ask for them.
  • Keep as much of your personal information as possible securely at home. Do not carry it around with you.
  • If you feel you have given your information out to any illegitimate source, reach out to the supplier of that information- such as your student loan service provider, your credit card company, and so on. And immediately change any login information and passwords, cancel credit cards, and take any other precautions you can. The quicker you make these moves, the better chance you have of stopping trouble before it starts.
  • Always, always, always check that any website you are entering personal information on is secure. You can easily do this by looking in the web address bar for a little lock. If it is there, the website should be secure.

Companies Known for Student Loan Scams

There are several companies that are known for student loan scams. Unfortunately, these scammers often simply just open up under another name. However, the FTC does share a list of companies that are known for student loan scams here, so be sure to check it out.

Conclusion

While organizations do work hard to prevent scammers from succeeding, it is up to each one of us to protect ourselves and our families. Learn all you can about scams as they are outed so you know what to look for. Above all, remember that if you need any help with your student loan debt, you can go straight through your loan service provider or the federal government for help.

If you are contacted by what you feel is an illegitimate company, report it so that others can be made aware. You can do this through your loan service provider, the FTC, or your state attorney general’s office. These complaints are taken seriously and you can trust that they will be investigated.

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What is the Impact of a Student Loan on Your Credit Score?

Having to pay back a student loan can be a real bummer and it’s a frustrating process, especially because of the student loan impact on credit score. But there can be an upside if you pay back the loans on time. In fact, regular payments can help your credit.

How Can a Student Loan Impact On Your Credit Score

There can be both a negative and positive student loan impact on credit score depending on your payment practices. A student loan typically has a long repayment period so the score will get a boost from a long credit history. Your payment history has a big impact on your score so if you make your payments on time every month, it helps build up your credit. However, if you do default on the loan or have late payments, it can hurt the score.

Positives Impact of Student Loans on Credit Score

Student loans are not impossible to deal with. There are some positives when it comes to a student loan impact on credit score. If you make at least the minimum payment and make those payments on time, you can build the score with a positive credit history.

Paying On Time Makes Up 35% of the Score

Payment history has a big student loan impact on credit score. Many things you make a payment on, such as car insurance and rent, aren’t usually reported to credit bureaus until you stop paying them.

Even though some payments aren’t reported to credit bureaus and don’t have a positive impact on your score, student loans do. The payments you make on your student loans can help you establish a good payment history. If you don’t have any other loans in your name then paying a student loan on time can help you start building credit from a younger age.

Easier to Build a Credit Mix

A credit mix doesn’t have as big of an impact on your credit score but it’s still important. A credit mix is the mixture of credit you have and this can include auto loans, credit cards, and mortgages. The more you have and the better variety, the better it will look on a credit report. If you already have a credit card then a student loan will help give you more credit mix.

Long Repayment Means Long Credit History

Another positive student loan impact on credit score is the following. The length of your credit history will influence about 15% of the score. Since student loans usually come with 10-year repayment plans, having a student loan can help you build a long credit history. If you do have the opportunity to pay off your loans faster, you should still take it since there’s no reason to stay in debt for longer.

Loan officer sends credit burear reports to bank manager.

Negatives Impact of Student Loans on Credit Score

If you aren’t properly handling your repayments then student loans can wreak havoc on your credit score and you can get a negative student loan impact on credit score.

Paying Late

Since paying on time has a good impact on the score, paying late will have the opposite effect. In fact, paying late can be the most negative student loan impact on credit score. Getting behind on paying your loan will hurt your score as well as your credit history. Bad marks can stay on the report for seven years.

Your student loan servicers can report the delinquency as early as 30 days after payment is due so don’t think you can just skip a month and it won’t have an impact. If you can’t afford to make your student loan payments, you may qualify for an income-driven repayment plan if you have federal loans. If you have private loans, you may be able to refinance for a lower monthly payment.

Defaulting Greatly Damages Score

Another negative student loan impact on credit score is an account in collections. This is even worse than a late payment. Accounts in the collection will stay on your credit score for seven years, just like late payments. These accounts stay on your credit report even after you pay them off.

Creditors don’t want to lend you money unless you can be trusted to pay it back and defaulting will show creditors you can’t be trusted. Defaulting on student loans means that it can be harder to get credit for other things in the future.

Types of Student Loans

There are different types of loans for students. No matter which one you choose, the student loan impact on credit score will be similar.

Private Loan

Private loan can be hard to get if you don’t have a good credit score or someone with a good credit score who can co-sign your loan. A private lender will run a credit check to decide if you qualify. If your credit score passes but is still low then you will likely have to pay more in interest. A private student loan impact on credit score can be possible if you qualify.

Federal Loan

You may not have a credit score when you are just starting out in life and a fed student loan can be a good option. You can get a federal loan without a credit check and it can have a positive student loan impact on credit score.

Personal Loans for Students

A personal loan can be helpful to students who are drowning in debt and aren’t able to make ends meet. Students don’t have that many lending options that are available to help them get out of debt. Credit cards can only make the matter worse and it can be frustrating to keep borrowing from friends and family. A personal loan for students can come with a lower interest rate that is more manageable. The lower rate can help you invest money in other projects that can help your income grow.

If you have already gotten into some bad borrowing habits and your credit is not that great then you can still get a personal loan for students. Some lenders may offer slightly higher interest rates if your credit isn’t that great and others will shorten the amount of time you need to repay the loan. Personal loans can be processed quickly, allowing you to have the money that you need. Personal loans don’t need any collateral, which makes them easier for students to get since the chances are likely students don’t have a lot to borrow against.

Should You Do Debt Consolidation for Student Loans?

A personal loan will allow you to do debt consolidation. This process allows you to take your accumulated debts and make one payment with hopefully a lower interest rate. It can help to start getting your debt under control after graduation and when payments for student loans begin.

Since you already know about the student loan impact on credit score, does debt consolidation also hurt your credit score? Determining if debt consolidation can hurt your credit score will depend on the different options you choose. When you first are selecting a loan for debt consolidation, you are applying for new credit, which means a hard inquiry on your credit report. Any time you do have a hard inquiry, your credit score can suffer.

While it initially seems that getting a loan for debt consolidation can hurt your credit score, adding new credit or a new loan can cause your utilization ratio to go up and this can actually help your score. However, for this to work, you need to not be acquiring any new debt.

Is There Help for Student Loans?

Chances are if you are applying for college and are looking at how to afford it then you have heard of FAFSA. This stands for Free Application for Federal Student Aid. If you want to be considered for financial aid or even have a work-study job during your college years then you will need to fill out this form. The form will take your income and your family’s income into consideration. It will then determine your aid eligibility for loans or grants. Grants are financial aid you want since they won’t need to be repaid.

Even if you think your family earns enough money to prohibit you from qualifying for aid, it is still a good idea to complete the form. The form is needed if you are going to receive any scholarships and will also be needed if you want access to federal student loans. Even if you do have to take out student loans, and many people do, it helps to have the most options for paying for college. If you don’t fill out the form, you can miss out on student loans and scholarships, which you may have been eligible to receive.

Understanding the 5Cs of Credit

Getting a loan approval can be dependent on your credit score but the credit score is only a portion of the decision on whether or not you are rejected or approved. Anything that can show the lenders whether you can repay will have an impact. A single item doesn’t determine your credit. Instead, it’s an equation with multiple factors that speak to the possibility and ability to repay the loan. These factors can be referred to as the five C’s of credit.

A person’s character can lead to decisions one makes, such as loaning money. Character is based on credit history. Your character is determined by your known financial actions. There is no way to see into the future about how your character can be so creditors go on past action.

A character can be judged more subjectively but capacity is straightforward. It’s the ability to repay. Lenders will look at income capacity to see whether or not you can repay the loan. If the outgoing money is more than your current income then you don’t have the capacity to pay the loan.

When you apply for a mortgage, a lender will want you to pay for a portion upfront. This can be low or it can be as high as the lender wants. This is also true with car loans. When you make a down payment, this is considered capital and it shows that you are serious about the purchase. You have some skin in the game and are invested in so you are more likely to pay off the loan and not lose your investment.

Collateral is slightly different than capital. In the loan world, this can be a check, piece of land, car title, or something else the lender sees as valuable enough to regain the money. Collateral can improve your chances of getting approved. Collateral is less of a financial risk for the lender.

Conditions are the conditions surrounding the loan. This can seem straightforward but there are conditions that can affect approval. A lender has to consider all conditions. Things like the interest rate and terms of the loan will also need to be factored in.

Establishing a Credit History

A student loan can have an impact on credit score, but what do you do if you are trying to establish a credit history? Students and young adults often have this problem and it seems unfair that you have to have a good credit rating in order to pay for something as important as education. Credit isn’t just about credit cards anymore and there are ways to establish a credit history even if you don’t already have one.

This is one of the easiest and painless ways so establish a credit history. This type of loan is one where you borrow a specific amount of money. The bank or credit union holds the money in an account you don’t have access to and you make monthly payments. When the amount is paid off you get the money minus any interest you needed to pay.

Many credit builder loans will be between $300 and $1000. It’s not about how much you can borrow but instead how much you can repay every month. You will need to be sure you can afford monthly payments before you begin the process. Otherwise, you can do damage to your credit score.

Your parents will likely have a credit card. You can ask to be an authorized user of your parent’s credit card. This means you won’t have a card of your own but can use theirs. You do need to check with the credit card company to see if they report any authorized users’ payments to them. If they don’t then this won’t work.

Make payments on time each month. If you don’t, not only are you hurting your credit history but also your parents’. The biggest advantage of being an authorized user is that their credit history will also make yours look good. You don’t even really need to use the card.

Some think that utilities, insurance, and rent are reported to credit bureaus. This is only true if you don’t pay. However, it’s still important to pay your bills in a timely manner. If you want credit bureaus to be notified of on-time payments then a third party reporting agency can be an option. You may have to pay for this service. But it can be worth it if you are trying to build up a credit history and do make all your payments on time.

If you have someone in your life with good credit you can ask them to co-sign a personal loan in order to build credit history. The payments you make on the loan will then be reported to the credit bureau so you can establish credit. It’s important that you don’t default on the loan since your co-signer will then be responsible for paying it and both your credit scores will be negatively affected.

No one will get a credit card before there is an established credit history but you may be able to get a secured card. This is when you put between $200 and $300 in the bank and let it sit there for about a year. The credit union or bank can see this as collateral for a secured credit card. You aren’t able to make large purchases with a secured card. But when you make the payments on time each month, the credit union or bank may give you an unsecured credit card in a couple of years.

Secured cards aren’t meant to be used long term and the purpose is to build or rebuild credit.

How to Increase Your Credit Score

Using student loans to your advantage and allowing the student loan impact on credit score to be positive can help you increase your credit score. There are also other ways to improve your credit score.
what makes up a credit score

As it has been said time and time again, it’s extremely important to avoid late payments since this makes up such a big chunk of the credit score. If you aren’t able to remember your payments then sign up for automatic payments. If you can’t afford your payments then there are options you can consider, including debt consolidation.

Start Paying Down Revolving Debt First

Revolving debt includes credit cards. You want to keep credit card balances as low as possible and ideally at zero. Not only does this help with your credit but it also helps you avoid hefty interest fees. Pay off your debts to keep your credit utilization in check.

Since items like paying rent and other bills don’t help your credit score unless you are late, ask your landlord if you are able to pay for your rent on a credit card. Use the money that you would typically spend on rent and pay down the balance every month.

Be sure to review your credit report and check for any errors. Every year, you are entitled to one free credit report. Don’t miss this opportunity to check your score. Errors can be common and can be costly to your credit score. Review reports every year and then dispute anything that isn’t right.

Final Thoughts

When asking what is the student loan impact on credit score on my student loan, it helps to remember your specific situation. If you can pay your monthly payment on time and establish a good payment history then you can have a positive student loan impact on credit score. However, it’s easy to start having a negative student loan impact on credit score if you aren’t careful about making payments. For those having trouble making payments, debt consolidation can provide some relief.

There are ways to establish your credit for those who are just starting out. And ways to improve your credit score in the future. For students who want to travel, instead of taking out more student loans consider a travel loan for students.

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