Student Loans 101 | Kids Shows

whoa are you wearing a limited edition organic free-range black t-shirt from Leo baton why yes thanks for noticing isn't that like 500 each where'd you get the money oh I use the free money that I received from my student loan your student loan wait wait wait that money isn't free you have to pay it back with interest it's called a loan for a reason student loans are kind of debt are you sure yes look it's great to be excited about starting adulthood and going to college but you should be very careful about jumping right into a ton of debt if you're gonna take out a student loan though you better learn about what you're getting into because you could be paying it back for decades there are two types of student loans private and federal private student loans come from private Banks while federal student loans are funded by the US government AKA taxpayers oh since federal student loans typically have lower fixed interest rates and more repayment options they tend to be more popular than private student loans in fact about 92 percent of all student debt is from federal student loans most federal student loan debt comes from direct subsidized loans direct unsubsidized loans and direct Plus Loans all three are available to undergraduate students who need financial assistance however only unsubsidized and Plus Loans are available to graduate and professional students Plus Loans are also open to parents of undergraduate students who need assistance covering any cost not covered by subsidized or unsubsidized loans subsidized meaning the loan's interest is paid by the U.S Department of Education while you're still enrolled in school nice and unsubsidized loans interest is not which means the interest will continue to build up while you're in school adding to the total amount you'll have to start paying off after you graduate if given the option accept subsidized money first so a subsidized loan is Freer money for everybody nope you have to qualify for subsidized loans by showing Financial need on the other hand unsubsidized loans and Plus Loans are available to anyone who applies student loans can be good debt if you use them to acquire skills necessary for your desired career however it's important to be reasonable and responsible about the amount you borrow is there evidence that shows your chosen college major will lead to a career you want how much does your future job pay is it enough to help you pay off the debt you're getting into to study for that job this should influence where you choose to go to school and how much money you should borrow so I really have to pay the money back yes you do unlike other kinds of loans student loans cannot be cleared under standard bankruptcy this means you're responsible for the debt forever that's true even if you don't finish school or can't find a job and because student loans increase your debt to income ratio it can make borrowing money for things like a car or house difficult in the future so once you've filled out your free application for federal student aid also known as FAFSA it's time to think about your options first consider whether you actually need a student loan and how much you need explore other kinds of financial aid like scholarships work study and grants many of which won't require you to take on debt or consider Community College as a first step before transferring to a university maybe you could even work save and take classes as you can afford them second whether you take a private or Federal Loan be sure you're clear on the loans terms and conditions and understand your legal obligation to pay it back third keep copies of all the paperwork related to your student loans and keep track of how much money you borrow it can add up fast be sure to calculate the payments into your personal budget if you're having trouble making payments contact your loan provider they may be able to put your loan into deferment or forbearance which temporarily reduces or pauses payment if you show that you have a need for those accommodations last make your payments on time and for the full amount required by your plan a loan will be considered delinquent if payments are not received and it can even go into default which can have some major consequences because College tuition is much higher than it used to be the need for student loans has significantly increased as a result more than half of students graduate with debt taking an average of 21 years to pay off so choose your next PATH wisely and invest in education that is going to give you a lifelong return and not years of debt hi I really need to return my Leo Vuitton t-shirt [Music] watch more at prageryoukids.com and parents don't forget to subscribe