I know, I know. 

Nobody wants to talk about student loans. They’re terrifying. 

And when I say I speak from experience on this one, I mean it. If you take our mortgage out of the equation, the student loans between my husband and I are 75% of our debt. 

That’s probably not particularly comforting. My point is, that we have made plenty of mistakes and learned from them and want to help you so you don’t make the same mistakes we did.  

I’m a big advocate for community colleges, technical school, apprenticeships, and other low-cost options to jump start your career and education. If you want to learn more about that, check out our homepage Adultish Bootcamp where you can get our FREE resource guide (that talks all about your different options and the pros and cons) and free budget template perfect for those just getting started. 

But if you do want to go to college and student loans are a must to get it paid for, 

First of all, same. 

Secondly, no shame. 

Although, not to be taken on lightly, there will be no shaming or blaming on student loans here. 

1. Federal Loans 

Subsidized vs Unsubsidized 

The easiest way to remember the difference is to understand the word subsidized. 

Put simply, subsidized means to have part of the cost covered (typically by the government) to keep the cost low. 

The government subsidizes these loans to keep the cost of borrowing down. 

There’s a few things about to know about subsidized loans, 

1. They are needs based (so if you or your parents make over a certain income bracket, you won’t qualify) 

2. They don’t gain interest while you are actively enrolled at least half-time in college

3. You should take these before unsubsidized if given the option. 

At the end of the day, subsidized loans will be considerably cheaper. 

Unsubsidized simply don’t have the same benefits. They will gain interest while you’re in school. So before you even get a chance to graduate, they will be higher than the amount of money you originally borrowed. 

Which is blatantly criminal if you ask me. 

2. Private loans

These are typically more expensive than federal loans. They don’t have the same benefits. 

Some private loans require payments while you are still enrolled in school where federal loans (whether subsidized or unsubsidized) do not require any payments until you graduate or drop below half-time enrollment. 

Interest rates on federal loans are fixed, which again, not always the case with private loans. This means that the rate at which the lender charges you for borrowing money can go up and down. Which is not only frustrating but ends up costing you quite a bit more money. 

Private loans typically have stricter repayment plans, huge fees for postponing payments, and they don’t qualify for loan forgiveness. 

For example, my husband tried to postpone one month on his private loans. He called asking for the short deferment and the fee for deferring was the same as one month’s payment. 

There were also lines in the loan agreement from his original servicer (Saillie Mae, you better believe I’m calling you out!) that stated if he were to pass away, his loans would be transferred to his next of kin (aka me) or any applicable co-signer. 

This is not the norm on student loans. PLEASE read the loan agreement. If it has anything in it that sounds fishy, DON’T sign it. Your family cannot benefit from your degree if you pass away. So saddling them with the payments on a useless piece of paper is truly CRIMINAL. 

Fortunately we were able to refinance and get away from the ridiculous Saillie Mae practices. 

To summarize this section: 

• Always go for the SUBSIDIZED loans first

• Unsubsidized will gain interest while you’re in school but federal loans still beat out private loans by a long shot 

• Federal student loans are safer and qualify for forgiveness programs, fixed interest rate, but can still be expensive

• Private loans can have predatory interest rates and other practices, if you are going to take out private loans, read ALL THE FINE PRINT

  • Demand a fixed interest rate, know all the terms and conditions in case you find yourself in a difficult financial position and can’t pay your loans

• Ask questions, keep your future in mind, and plan for the worst, hope for the best. 

3. Understanding the Components 

-Signing the Agreement 

A student loan agreement is called a Promissory Note or MPN (Master Promissory Note). 

On it’s surface, it just looks like a ‘promise-to-pay’, but inside the document are lots of important terms and conditions. And lenders are legally required to disclose your interest rate before you sign for the loan. 

Private lenders may call it a loan agreement, contract, etc. When in doubt, just ask to see all terms, conditions, rates, and fees before signing anything, whether in person or more likely electronically.

-Interest Rates

What exactly is interest? 

Interest is the cost of borrowing money, or money the lender charges to lend money. 

It's the reason businesses lend money at all. 

I don't want to get too in the weeds about the definition of interest in how it works. If you a quick read on interest check out this page here: 

https://www.investopedia.com/terms/i/interest.asp

OR we talk all about interest rates and how they work in our live webinar group course which you can check out here: 

www.adultishbootcamp.com/livegroupcourse/

By law, they HAVE to disclose your interest rate before you sign anything. 

Federal loans will typically provide helpful calculators to give you idea of your repayment amounts, monthly payments, and repayment options. 

I highly suggest researching a couple desired career paths and entry level positions alongside your chosen degree (or degrees your considering) and get an idea of what you can expect to make in your first couple years. Reddit can be a great resource when looking for some real-world honest feedback, OR finding a mentor. 

In a perfect world, student loan interest rates would be restricted to 2% or less. But that's just not the case. 

As a general rule, I would avoid anything over 5-6% completely and aim to take loans 4.5% and under. The lower the rate, the less it costs to borrow the money. 

Keep in mind that interest rates fluctuate based on the federal rate and it is all connected to the current economy. These things are totally out of your control and if you want to go to college, you should go in with a plan and be prepared to weather the storm. 

I'm personally a big fan of starting with a community or state college and transferring to a four year. Not only will you save money on those first couple years but most 4-year schools offer transfer scholarships to those coming in with their associates from a community or state college. And they're usually pretty significant in terms of funds available. I actually received a transfer scholarship on 3 different occasions. One was to a private university that covered HALF of my total tuition. Obviously a pretty significant savings.