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Student Loans

The average student shells out approximately $30,000 per year for college. That price can double or even triple depending on your location, degree plan and living arrangements. Many students can’t afford these costs without help from student loans. In fact, nearly 7 out of 10 college students rack up debt while completing their degree programs.

Whether you’re one of these students looking for more details about student loans before you apply or you’re a parent or guardian who needs information about financial aid for your soon-to-be college student, we’re here for you. Navigating the best student loan options can get confusing, so we’ve created this info-packed guide to help make it a bit easier.

Read our guide from top to bottom, or skip to the sections that interest you. Here are the sections we’ve included:

Here’s a rundown of what info you can expect from the categories mentioned above:

We’re here to take the guesswork out of dealing with student loan providers. Learn the ins and outs of loans for college below in our detailed article for students and parents. We have answers, whether you’re searching for the best banks for student loans or need help figuring out how to conduct the process of student loan refinance successfully.

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What Are Student Loans?

Student loans are funds that are borrowed for educational expenses. These loans are used for post-secondary educational costs, not preschool or K-12 expenses. This means that student loans are for colleges, universities and some vocational or trade schools.

You can use student loans at private colleges or state colleges that accept financial assistance. The majority of U.S. colleges let students pay with loans, but a small number require direct payments from attendees. Always check with your preferred college before assuming education loans will cover relevant expenses.

Unless otherwise specified, your loans for educational expenses must be repaid with interest. Interest typically begins accumulating right away, even if you don’t have payments due yet. Keep that in mind before you accept funds for your educational costs. Payments can quickly become overwhelming, so don’t borrow more than you can handle. We’ll discuss student loan repayments in more detail throughout this article.

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What’s the Difference Between Federal and Private Student Loans?

You can obtain student loans from the government or a private lender.

Government student loans come in two forms: subsidized and unsubsidized. Subsidized loans are based on financial need. They're a great choice for low-to-moderate income students who want to save money on interest. The federal government covers the student loan interest you rack up as long as you are currently enrolled in school. You don't have to repay this interest.

Unsubsidized student loans are available for everyone interested in pursuing post-secondary education. Interest begins accumulating right away, and you're on the hook for all of it. However, you can postpone loan payments as long as you're enrolled in college at least half time. Keep in mind that this doesn't stop your lender from charging interest. When you graduate, expect to get hit with a hefty bill for your unpaid interest.

Some financial experts believe you should hold off on getting a private loan until you've maxed out federal funds. That's because private loans are harder to get since they consider your credit score and income. Many private loans also lack the protection associated with federal loans. You generally can't request loan forgiveness or get on an income-based repayment plan for private student loans. You also can't convert private loans to grants via state or federal programs, though you may have luck finding an employer that will pay off your balance.

Federal Student Loans

Federal student loans are loans backed by the U.S. government. They are often combined with other forms of financial aid, such as need-based grants. You can apply for government student loans by completing the Free Application for Federal Student Aid, commonly called the FAFSA. There is no charge to fill out the FAFSA or submit your information.

Private Student Loans

Private students are loans that do not come from the U.S. government. Private loans come from banks, credit unions and other financial institutions.

Funding TypeRequired
Federal Student Loans Information about taxed and untaxed income, Social Security number or Alien Registration number, driver’s license number, bank account numbersUndergraduate students can borrow up to $5,500 to $12,500 per year in Direct Subsidized Loans and Direct Unsubsidized Loans. Graduate students can borrow up to $20,500 per year in Direct Unsubsidized Loans. 1 to 3 weeks 10 to 30 years depending on loan type No minimum credit score required; no credit check performed
Private Student LoansSocial Security card or Alien Registration number, driver’s license, 1040s or W2s, tax returns from the last few years, information about untaxed income, such as child support or disability payments, statements for bank accounts, 401K, stocks and CDsVaries based on your provider’s limits and guidelines2 to 10 weeksVariesTypically require a FICO in the low to mid 600s, though some lenders offer funds for applicants with FICO scores in the mid 500s

Pros and Cons of Federal Loans Vs. Private Loans

We discussed the key characteristics of federal loans and private loans above, but you might be wondering how this data impacts you. That’s why we’ve created helpful lists of pros and cons below to help you understand more about student loan types.

Federal Student Loans: Pros and Cons

Many borrowers have good results with federal student loans, but they might not be right for you. Here are the pros and cons associated with government loans for students.



Private Student Loans: Pros and Cons

Private loans help numerous students fund their college education, but are they a good fit for you? Compare the pros and cons below before deciding.



All loans have benefits and disadvantages. If you need more information before making a decision, reach out to Lendzi. We’re here for you!

How Do You Choose the Best Student Loans for Your Needs?

Before applying for student loans, think about what you expect from a financial aid package. Are you hoping for low interest? Do you want a loan with flexible repayment terms? Are you okay with having your credit score evaluated during the application process?

It’s also important to figure out how much you need for your education as well as how quickly you can repay borrowed funds. Some students rely solely on government loans, while others combine federal funds with personal loans. This often occurs when tuition or housing costs exceed the federal limits for student loans.

Think about the career you’re pursuing. Will you have a high annual salary, or will it be difficult for you to afford high monthly payments? Don’t borrow more than you can afford now or in the future. It’s crucial that you consider your long-term situation as well as what’s happening right now. This will help you reduce your risk of borrowing too much.

Here are some helpful questions to ask yourself before you choose a lender:

Consider these factors before you apply for student loans, as you may find your preferred lender doesn’t meet your needs. It’s helpful to review the terms from several lenders before selecting one.

How Do You Apply for Student Loans?

You can apply for student loans online or at your college’s financial aid office. If you’re using a private lender, you may have the option of applying online, over the phone, through the mail or in person.

Every lender requires different documents for the application process. However, your lender may require the following:

If you’re meeting with your lender in person, ask for a list of required documents before your appointment. This will help prevent multiple visits. You may also have the option to fax or email copies of your documents.

Who Qualifies for Student Loans?

Just about anyone can get a student loan as long as they are pursuing a post-secondary education. Requirements vary depending on whether you request government student loans or go through a private lender.

It’s pretty easy to get approved for federal student loans, at least compared to private loans. However, you may get denied for federal loans if any of the following statements are true:

Not all of these are deal breakers, though. You can still receive federal funds if you appeal your rejection and/or rectify the issues resulting in your rejection. If you were convicted of a drug-related crime, you might qualify for federal aid if you attend rehab or agree to undergo random drug testing. Lendzi can help you interpret the requirements of your school or lender so you can determine whether you qualify for federal funds.

Private student loans, which include bank loans and loans from credit unions, are often harder to get. You must meet a number of requirements, including income requirements and credit score requirements.

Here are some reasons you might get rejected for a private student loan:

Before you apply, find out if your preferred lender has specific requirements. This can help you prevent an unnecessary ding on your credit report.

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How Much Can You Borrow When You Receive Student Loans?

Borrowing guidelines vary based on whether you choose federal loans or private loans for your education. Federal student loan recipients are often capped at $12,500 to $20,500 per year. Some private lenders don’t have predetermined borrowing limits, but that doesn’t mean you can receive unlimited funds.

Here are some factors that can influence how much you can borrow as a loan recipient:

Give us a call if you need more money than your student loans provide. We can discuss other financial solutions, such as personal loans and lines of credit, for you.

Borrowing Limits for Federal Student Loans

Undergraduate Students
Undergraduate Students
Graduate and
Professional Students
Year One$5,500; no more than $3,500 can be subsidized$9,500; no more than $3,500 may be subsidized$20,500
Year Two$6,500; no more than $4,500 may be subsidized$10,500; no more than $4,500 may be subsidized $20,500
Year Three and Beyond$7,500; no more than $5,500 may be subsidized $12,500; no more than $5,500 may be subsidized $20,500
Lifetime Maximum$31,000; no more than $23,000 may be subsidized$57,500; no more than $23,000 may be subsidized$138,500; no more than $65,500 may be subsidized

How Are Student Loans Funded?

Student loans are funded by the federal government or private financial institutions. Once funds are available, the disbursement methods vary based on your loan type.

Federal student loans are typically disbursed directly to your post-secondary institution along with other forms of financial aid, such as Pell grants. If your financial aid package exceeds the cost of enrollment, you can request a refund. The school must then disburse your excess funds from grants or loans within a specific time frame. The amount of time varies based on your school’s guidelines and whether you are a first-time student. First-time students may have to wait 30 to 60 days before receiving a disbursement of excess funds.

Financial aid refunds are disbursed via check, direct deposit or a prepaid debit card, depending on your school’s policy. Your school should provide this information before it receives your financial aid package. This gives you an opportunity to make sure you are happy with the conditions before requesting federal aid.

Private student loans are funded by a financial institution, such as a bank or credit union. Sometimes the financial institution sends them directly to your school, but you may receive them yourself and then have to pay the school. Funds might be deposited in a checking or savings account, with the financial institution providing the private student loan. You might also have the option of a cash payment or paper check.

Can You Take Out a Personal Loan for College?

You can take out a personal loan for just about anything you want. This includes college expenses.

Here are some expenses you can pay with a personal loan:

College tuition

Certification or
licensing fees


Electronics needed for educational purposes, such as a laptop, desktop PC or tablet

Transportation to and from college, including the purchase of an automobile

You have lots of freedom when it comes to spending a personal loan that you obtained for college. In fact, you don’t even have to spend it all on college-related expenses unless your lender specifies otherwise. You can use a personal loan for clothes, food, shampoo, makeup or even a much-needed vacation after you pass your finals.

Remember, though, that approval for a personal loan is not guaranteed. You must meet the requirements set by your lender, such as:

Each lender has its own requirements for personal loans. Lendzi has information about top lenders and can help you figure out which lender best meets your needs.

What Are Your Repayment Options for Student Loans?

There are numerous repayment options for students who receive government student loans, also known as federal loans. We describe some of the most well-known options below.

Standard/Level Plan


Extended Level

Extended Graduated

Income-Driven Plans

Federal Direct Consolidation

and Terms
EligibilityFactors to
Who should
consider this plan?
Standard/Level Direct and FFELPEqual payments of $50 or more per month for up to 10 years All federal loan recipients Placement is automatic unless you select a different repayment plan. This is the shortest payment plan with the least amount of interest as long as you pay back funds as scheduled. Loan holders with a steady source of monthly income who can consistently afford set monthly payments
Graduated Direct and FFELP Monthly payments begin at a low rate, then gradually increase for 10 years All federal loan recipients; as requestedYou must cover interest in each monthly payment even if you don’t pay toward the loan itself. Your monthly payment amount may increase at the end of the term. You expect your monthly income to increase over the years
Extended LevelDirect and FFELPEqual monthly payments for a term of up to 25 years Borrowers without an outstanding balance on FFELP or Direct Loans as of 10/07/98 and who do have a Direct or FFELP outstanding loan debt that exceeds $30,000 Payments are lowered because the duration of your loan is extended. Because of this, interest will likely increase. You need a low monthly payment amount; however, you may want to consider an income-driven option instead.
Extended GraduatedDirect and FFELPMonthly payments begin at a low rate, then gradually increase for 25 years Borrowers without an outstanding balance on FFELP or Direct Loans as of 10/07/98 and who do have a Direct or FFELP outstanding loan debt that exceeds $30,000You have a longer amount of time to pay back your loan, resulting in lower payments. You can expect to pay more in interest because you’re taking longer to pay back your loan. You need a low monthly payment amount. However, an income-driven plan might be better.
Income-Driven OptionsVaries based on which plan you choose Monthly payments are reduced based on your income level for up to 25 yearsVaries based on your income, family size and loan balance Annual recertification is required. Monthly payments are adjusted annually. Some plans offer complete loan forgiveness for the amount remaining when the payment plan ends. You need a low monthly payment amount that fluctuates based on your income level rather than remaining the same over time.
Federal Direct ConsolidationDirect and FFELPEqual monthly payments for a term of up to 30 yearsAnyone with a Direct Consolidation loanYour interest rate might change, and you may pay more over time. However, you might still qualify for income-driven plans. You may also lose federal loan benefits.You want to combine multiple loans with different interest rates and payment amounts into one loan with a fixed monthly payment amount and interest rate.

What Is Student Loan Deferment?

Many people find it difficult to keep up with their student loan payments. If you are struggling to repay your loans, consider deferment. Deferment lets you temporarily postpone payments on federal loans for a predetermined length of time. Interest does not accumulate on subsidized loans while they are deferred. However, unsubsidized loans continue to rack up interest

There are many different programs available for former students who are considering deferment, including:

  • Action Programs Deferment: Lasts 36 months for full-time paid volunteers who participate in ACTION programs
  • Armed Forces Deferment: Lasts 36 months for active-duty members of the U.S. armed forces
  • Economic Hardship Deferment: Lasts 36 months for low-income individuals who receive state or federal public assistance
  • In-School Deferment Program: No payments required for students who attend a qualifying school at least half time
  • Temporary Total Disability Deferment: Lasts 36 months in the event that you or your spouse are disabled and cannot work for at least 60 days.
  • Unemployment Deferment: Lasts 36 months for unemployed individuals who are actively seeking new

This is not a full list of deferment programs for students. You can also request deferment if you are a working mother, a volunteer at a tax-exempt organization or a PLUS borrower with a dependent student. Most deferment programs last for up to three years, but that doesn’t mean payments are immediately due after that. You may also qualify for forbearance or loan forgiveness.

It’s easy to make mistakes when applying for a small business loan, but you can plan to avoid them.

What Is Student Loan Forbearance?

Forbearance is similar to deferment, but you don’t need a specific reason to request it. A forbearance is an agreement you make with your lender. It’s basically a promise to repay funds after a set break. When your break ends, your normal payment schedule resumes.

You can request a forbearance whenever hardship strikes, such as health problems or a reduction in pay at work. Unlike deferment requests, you don’t need to experience a specific type of hardship to put your loans into forbearance status. A forbearance is also shorter than a deferment and typically lasts for one year.

What Are Student Loan Interest Rates?

Student loan interest rates are the rates charged for the funds you borrow. As with mortgages and other financial products, the interest can be fixed or adjustable. Fixed rates remain the same throughout the duration of your loan. Adjustable rates can increase or decrease over time.

Federal loan interest rates begin at 2.75%, but some students and parents pay as much as 5.30%. The rate you pay depends on whether you’re an undergraduate or graduate student. The type of loan you request also plays a role.

The chart below shows interest rates for loans disbursed between July 1, 2020, and before June 30, 2021.

Interest rates can change if you refinance your federal student loans, so don’t panic if these rates are higher than you like.

Borrower TypeInterest RateLoan Options
Undergraduate Borrowers2.75% Direct Subsidized Loans and Direct Unsubsidized Loans
Graduate or Professional Borrowers4.30% Direct Unsubsidized Loans
Parents and Graduate or Professional Students5.30%Direct PLUS Loans

Private student loans often have higher interest rates than federal loans, but that’s not always the case. For comparison purposes, we’ve compiled some private student loan interest rates from popular lenders below. As you can see, applicants with higher FICO scores often enjoy lower interest rates.

LenderFixed APRVariable APRCredit Requirements
Citizens One 4.25 - 11.53%1.24 - 11.00%No minimum score requirement; based on credit history
Ascent 3.53 - 14.50% 2.72 - 13.00%540 FICO
Sallie Mae4.25 - 12.35%1.25 - 11.15%No minimum score requirement; based on credit history
LendKey 4.25 - 12.35%1.25 - 11.15%660 FICO
SoFi4.11 - 11.83%1.78 - 11.73%No minimum score requirement; based on credit history
College Ave3.59 - 12.99%1.24 - 11.98%FICO must be in the mid 600s or higher
Cognition Custom Choice4.26 - 10.74%1.25 - 9.73%625 FICO
Discover4.59 - 12.39%1.59 - 10.99%No minimum score requirement; based on credit history
Earnest3.55 - 12.78%1.24 - 11.44%650 FICO

How Do You Refinance Student Loans?

Over time, your credit score or financial commitments can change. When this happens, many students and graduates decide to refinance their student loans. Refinancing your student loans can help reduce your interest rate, which will reduce your monthly payments over time. It can even reduce the overall balance you owe on your loans. Many borrowers also appreciate how multiple loans are consolidated into one new loan when they refinance. This eliminates the need to remember multiple payments each month.

Some borrowers do not qualify for refinancing. In order to refinance student loans, you must meet the guidelines established by your preferred financial institution, such as:

Your lender may also ask if you have finished your degree or have plans to return to school. This helps your lender determine whether you may accumulate additional loans over time.

Refinancing can save you money over time, but it isn't the best option for every loan recipient. If you refinance your loans, you may lose some of the protection offered to federal loan recipients. For example, you may lose the chance to enroll in some of the flexible repayment programs that the government offers.

If you believe that refinancing student loans is right for your situation, don’t work with the first lender you find. Compare the interest rates and repayment terms from multiple refinancing lenders to make sure you’re getting the best deal possible.

Clean up your credit before refinancing. Refinancing might not be ideal for you if you have:

You can always get a cosigner if any of the above statements apply, but some applicants prefer to wait until they qualify on their own. Talk to our Lendzi team if you’re unsure whether you’re a good candidate for student loan refinancing. We’ll help you calculate your potential savings and explain what, if anything, could impact your new interest rate.

What Happens if You Drop or Fail Your Classes?

Your academic performance can impact student loan eligibility, especially if you have federal student loans. Many colleges require students to maintain Satisfactory Academic Progress, also called SAP. If you do not maintain satisfactory progress at your college, you might be placed on academic probation or receive a warning. You will lose your federal financial aid if you do not fix any academic issues that have contributed to this status.

It’s also important to remember that dropping or failing a class doesn’t mean you’re off the hook for payment. You must still pay for each class, either with financial aid or personal funds, regardless of your performance. The federal government has restrictions regarding how many times you can receive financial assistance for a dropped or failed class. Typically, you cannot retake the same class more than two or three times without paying out of pocket.

Some students refuse to repay expenses associated with dropped or failed courses. This can backfire, as the school can freeze your transcripts. This means you can’t access your academic history or provide proof of attendance to potential employers or new colleges. You may also have funds deducted from future financial aid packages to cover the balance you owe. Losing these funds can be frustrating if you were counting on paying for a new semester with them.

That doesn’t mean your college expects perfection, though. If you fail just one class, your financial aid package might not be affected. Check with the college you attend or plan to attend, and ask about its financial aid policies. This can help you stay on track when courses start.

Can You Combine Student Loans With Other Types of Aid?

You can combine student loans with other types of aid as long as your educational institution allows it. You can even combine multiple types of student loans when possible. Many students turn to private lenders after federal funds fail to cover their full tuition. In this situation, students may have subsidized and/or unsubsidized government loans, plus private student loans. You can also combine personal loans, scholarships, grants and work-study awards with your student loans.

Let’s break things down using an example:

Yolanda enrolls at Harpthorne University so she can pursue a nursing degree. Her tuition costs $23,000 per year. She decides to live on campus, which costs an additional $10,000 per year. Her textbooks, technology fees, meal plan and parking pass add another $4,000 to Yolanda’s total. All together, Yolanda needs $37,000 per year if she wants to get her nursing degree from Harpthorne University.

Yolanda has $2,000 in her savings account, so she decides to put that toward her tuition. This leaves Yolanda with a $35,000 bill. She applies for a Pell grant and receives the maximum award of $6,345. After applying those funds, Yolanda still owes $28,655. Her dad offers to cover $655, so now her balance is down to $28,000 for the first year.

Yolanda doesn’t have $28,000 since she’s already drained her savings account, so she applies for federal loans. She is informed she can take out $12,500 per year as an independent student, so she agrees to do that. However, Yolanda still owes $15,500. She remembers her fast-food job offers $500 toward tuition reimbursement, so she requests that. Now her balance is down to $15,000.

Yolanda has decent credit, but she’s classified as low-income based on her annual salary. Because of this, she is unable to get a single loan for $15,000. However, Yolanda is able to qualify for a $5,000 personal loan from her local credit union, plus a $9,500 private student loan from Sallie Mae. She also gets a $500 scholarship from a local company that loves that she played the French horn in high school.

Yolanda contacts her college’s financial aid office and pays them $2,655 from herself and her father. Her college helps her create a financial aid package for the remaining $34,345 balance. Yolanda notifies the financial aid about her scholarships, grants and loans. The college agrees she can begin courses immediately while she waits for funding to arrive.

To recap, Yolanda is paying for her nursing degree with the following payments:

This may seem confusing, but it’s actually fairly common for college students to use multiple sources of income. Your college will work with you to get tuition paid, whether you’re a first-time student or a returning learner pursuing a masters degree.

How Do You Convert Student Loans to Grants?

Some students have the option to convert student loans to grants if they meet certain requirements. This is beneficial because grants do not require repayment. Loans must be repaid, often with interest.

Students pursuing a public service career may have the option to eventually convert student loans to grants. Your employer may also offer incentive programs where loans become grants if you remain with your company for a set period of time, such as five or 10 years.

Loan-to-Grant Programs for Students

Many programs that convert loans to grants are geared toward students pursuing a specific career. These conversion programs generally only cover federal loans, not loans from private lenders or unsecured personal loans with bad credit records.


Students pursuing a teaching degree can request loan conversion from the TEACH Grant. The TEACH Grant offers up to $4,000 per year toward loan conversion after requirements are met. In order to qualify for the $4,000 benefit, you must meet the following requirements:

  • You must agree to teach at a school or agency that primarily serves low-income families, such as a Title I school. You can find these schools listed in the Teacher Cancellation Low-Income Directory
  • You must agree to spend four full academic years within an eight-year period teaching in a grant-eligible position.
  • You must teach a field classified as high need in your area, such as math or science. These fields are detailed in the Teacher Shortage Area Nationwide Listing

Failure to meet these requirements will result in your grants becoming converted to Direct Unsubsidized Loans. Your school may also have additional requirements, such as maintaining a 3.25 GPA or scoring about the 75th percentile on a college admissions test.

Employer-Based Programs

Some companies offer programs where employees can have loans converted to grants after a set period. You may qualify in as little as one year, though some companies expect five to 10 years of service. You can find information about these programs by contacting the human resources department at your employer or searching the websites of potential employers.

Hospitals often offer programs like this, as well as sign-on bonuses and student loan forgiveness programs. The medical field is rapidly growing, so health care graduates are in demand. Employers must offer competitive benefits to get recent graduates to apply.

Can You Have Student Loan Debt Forgiven?

Eliminating student loan debt is difficult, but it’s not impossible. Having student loan debt forgiven via bankruptcy is unlikely, but there are a handful of career-specific forgiveness programs. Read on to learn about some of the programs that help students get rid of their loan debt.

Teacher Loan Forgiveness

In addition to the TEACH Grant, the government offers a Teacher Loan Forgiveness program. Teachers interested in this forgiveness program must spend at least five consecutive years employed by a qualifying school. You can find these schools listed in the Teacher Cancellation Low Income Directory.

The amount of loan forgiveness varies based on your position, but teachers generally have $5,000 to $17,500 forgiven. PLUS Loans are not eligible, but teachers can have Direct Loans and Stafford Loans forgiven.

NURSE Corps Loan Repayment Program

Health care workers in underserved communities may qualify for loan forgiveness via the NURSE Corps Loan Repayment Program. Registered nurses can apply, but the program is also available for nurse faculty members and nurse practitioners.

To qualify, you must spend at least two years working for a qualified health care facility. At this time, you may have up to 60% of your loans forgiven. If you spend a third year with your qualifying employer, you may receive an additional 25% in loan forgiveness.

Keep in mind these funds are taxed. However, so are many other types of loan forgiveness.

Public Service Loan Forgiveness

If you're planning to pursue a career with a not-for-profit organization or the government, the Public Service Loan Forgiveness program can benefit you. This program forgives the balance on Direct Loans after you make payments for at least 120 months. The payments do not have to be consecutive, but they must be made regularly. Also, you must be a full-time worker to qualify for this program.

Direct Loans, including Perkins Loans and FFEL Program Loans that were consolidated into Direct Loans, are eligible. Students who work at religious-based nonprofits do not qualify for loan forgiveness via this program. You must complete an Employment Certification for Public Service Loan Forgiveness form each year to remain eligible

Closed School Discharge

Some students register for college only to have the school close shortly after their enrollment. In situations where your school shuts down while you are enrolled or within 120 days after you withdraw, you may qualify for a Closed School Discharge. This discharge covers Perkins Loans, Direct Loans and FFEL Program loans.

Students may qualify for a full refund if their educational facility qualifies for the Closed School Discharge forgiveness program.

Total and Permanent Disability Discharge

Students classified as having a total, permanent disability may qualify for a total discharge of their federal loans. These loans include Direct Loans, Perkins Loans and FFEL Program loans. You can also revoke your TEACH Grant service obligation if you become disabled.

A TPD Discharge application is required. Your application must include verification proving you are disabled from a physician, the Social Security Administration or the U.S. Department of Veterans Affairs. If you notify Nelnet about your intent to apply for disability-related discharge, the company will halt your federal loan payments for 120 days. This gives you time to gather the required information and complete the application process.

Discharge Due to Death

When you die, your student loans don’t necessarily disappear. They are passed on to family members, such as your spouse, parents or children. The recipient of your debt varies based on your loan’s agreement and whether or not you had a cosigner.

However, PLUS Loans, which include Direct Loans, Perkins Loans and FFEL Program loans, are discharged when you die. Someone must notify your loan servicer on your behalf in order for the discharge to go through.

What Can You Buy With Student Loans?

Student loans, regardless of whether they come from the government or a private lender, are intended for educational purposes. It is generally considered fraud if you use student loans for noneducational expenses, so be careful.

Guidelines vary depending on where you attend school and what type of loans you have. However, you can typically use student loans for the following expenses:

Tuition Fees

College tuition for an accredited program

Program Fees

Fees related to your degree program, such as expenses for student teaching, internships, fingerprinting and background checks or technology lab use


Studying abroad

School supplies

such as pens, notebooks, calculators, laptops and folders

Transportation costs

such as bus tickets or cab fare, to get to school. However, some loan providers have restrictions that say funds cannot be used to purchase a car for school.

Living expenses

such as the rent for your dorm room or meal plan

Off-campus housing expenses

Some student loans also cover childcare costs if you’re a parent. If yours doesn’t, consider applying for day care assistance from your state or seeing if your school has on-site childcare. Many colleges offer discounted childcare rates for students.

Student loans are generally not intended for entertainment or cosmetic purposes. That means you can’t use your loan to buy concert tickets, nor can you pay for a haircut or mascara with it. You also cannot use your loan for illegal purposes, even if they are education-related expenses. You can’t hire an essay writer with your loan money or use it to bribe a professor into giving you a good grade. However, you might be able to use your loan to hire a tutor if you’re struggling with your coursework.

When you purchase something with a student loan, it’s wise to keep receipts. This provides a paper trail in case you’re ever audited. It’s also helpful to check with your lender before you begin spending money. Your lender can let you know if there are any restrictions when it comes to covering education-related expenses with your loan. Lendzi can also help you interpret your loan agreement if you have questions, so please don’t hesitate to reach out to us.

8 Tips for Managing Your Student Loans

When we meet with student loan borrowers and provide loan-related information, they often say, “I wish I had known that!” That’s why we’ve created this handy list of tips for managing your student loans.

1: Don’t Borrow More Than You Need

Recent college graduates are often drowning in student loan debt. One reason is because many colleges dole out generous financial aid packages that cover more than students need. It’s not uncommon to get a refund for excess financial aid, but do you really need that money? Consider putting your financial aid refund toward your loan balance. You can also request that your school only provide funds for your exact tuition costs rather than living expenses and other needs.

2: Consider Your Career Goals

College can help increase your earnings potential, but a degree doesn’t guarantee financial stability. Think about the field you’re pursuing. Are jobs in demand, or will it likely be a while before you get hired? Will your career pay well, or are you choosing a low-paying job in a field you love? It’s great to pursue your passions, but be careful not to borrow more than you can easily repay.

As we discussed earlier, some careers qualify for loan forgiveness. This is something to keep in mind if you plan to secure a government job or work as a nurse, teacher or employee at a not-for-profit organization.

3: Pay Your Interest ASAP

Many students take advantage of loans that require no payments until after graduation. Unfortunately, interest still accumulates on many of these loans. This can quickly increase your overall loan balance and make it difficult to repay your borrowed funds. Start paying your interest early if you can rather than waiting until six months after your graduation date.

4: Compare Multiple Lenders

Your options are limited if you’re applying for federal financial aid, but there are multiple lenders available for private loans. Compare the rates of a few different lenders before you apply for private student loans, especially if you have good credit. A high FICO score can help you score a low-interest rate. This can save you big bucks over time, especially if you plan to take out loans each year you’re in college.

5: Apply for Scholarships

Don’t just rely on student loans to cover your college costs, even if you don’t qualify for need-based grants. Scholarships can help reduce your college costs, and you can apply for multiple awards. Not sure you’ll qualify? There is truly a scholarship for everyone, whether you’re a crowd-pleasing singer or an energetic athlete.

You can find scholarships by searching sites, such as FastWeb, or contacting your college’s financial aid office. You can also Google scholarships based on your skills, hobbies, extracurricular activities or unique characteristics. There are scholarships for people who play chess, Christians, left-handed students and scholarships for blondes. Apply for as many scholarships as you can because colleges often accept multiple awards.

6: Learn Your Student Loan Servicer

“I want to pay my loans, but I have no idea where to send the money.” We hear this complaint often, and we completely understand why. Loans are often transferred to different companies, making it difficult to figure out who needs repayment. Some students try to pay their schools, but schools generally don’t accept loan payments. They only process and disburse them.

When you sign the Master Promissory Note (MPN) for federal loans, make sure you save a copy of all of the documents. You should also save a copy of everything you sign for private student loans. These documents can help you figure out who needs your money when payments are due. Don’t expect lenders to reach out when it’s time to pay, as sometimes they don’t.

7: Learn the Basics of Student Loan Refinancing

This tip is especially important for students with private loans, as refinancing isn’t always recommended for federal loans. Students with private loans may have interest rates in the double digits, and this can cost you thousands of dollars.

Let’s say you have a private student loan for $50,000. Your lender charges a 12.5% interest rate, and you plan to repay your loan in 10 years. Even if you pay $731.88 per month toward your loan, you’ll still rack up a whopping $37,825.70 in interest. That means you’re paying $87,825.70 for a $50,000 loan.

In a situation like this, it’s smart to refinance as soon as you can. You can do this on your own or with a cosigner. It just depends on how solid your credit history looks when you apply.

8: Watch Out for Scammers

Scammers love preying on innocent students, especially those with unpaid loans. Expect to get emails, letters and phone calls from companies offering to help consolidate or wipe out your student loans. Some of these companies even pretend they’re backed by the U.S. Department of Education in an attempt to build your trust.

You don’t need a debt management company for help with federal loans. There are many repayment programs available. You may benefit from debt management if you have private student loans, but be careful. Make sure a company is legit before you send them any money or provide your personal information.

Student loans are a life-long investment for some people. Protect your financial health by following the tips above if you’re considering student loans.

FAQs About Student Loans

We’ve covered an extensive range of topics in this guide, but we realize you may still have questions about student loans. We’re happy to help, so we’ve compiled some common questions about student loans below.

Government student loans, also called federal loans, are available for all credit types. The U.S. Department of Education does not perform a credit check, and neither does the college you're attending. You can get federal loans as long as you meet the qualifications established by the government, none of which involve your credit history.

Many people mistakenly assume the U.S. Department of Education establishes interest rates. However, they are put into place by the federal government and are subject to change each year.

The FAFSA will automatically calculate whether you're an independent or a dependent student when you apply. You might get classified as an independent student if you meet any or all of the following guidelines:

  • You are at least 24 years old.
  • You are an emancipated minor with legal documents verifying your emancipation.
  • You are separated or married.
  • You are a U.S. veteran or an active-duty member of the armed forces.
  • You provide more than half of the support for your children.
  • You have dependents other than your biological children and spouse, such as a niece in your custody.

You are not considered an independent student if you live with someone else who provides the majority of your financial support.

Defaulted student loans are loans with seriously delinquent payments. For federal loans, you must go 270 days, which is approximately nine months, without making any payments. This results in a default status, which you can find listed in your My Federal Student Aid account online.

A defaulted student loan can damage your credit pretty badly, especially if it gets sent to collections. Do whatever you can to avoid having your loans default.

Talk to your lender immediately if you can't afford your student loan payments. Many lenders are willing to be flexible, especially if you usually pay your loan on time.

If you have a federal loan, look into repayment options, such as income-driven repayment, Federal Direct Consolidation and Graduated repayment programs. Contact your lender or the Lendzi team if you need help.

If you're struggling with private loan payments but haven't defaulted yet, consider refinancing your student loans. This can help reduce your interest rate, making it easier for you to catch up on your loan costs.

Only if you fail to show up for your court date pertaining to unpaid student loans. Some debt collectors and scam artists attempt to scare students with threats of jail time so they pay off their balances. It's possible to get arrested if you miss a court date, as we mentioned earlier, but arrests for delinquent loan payments are rare.

Students interested in obtaining federal student loans must complete the FAFSA. The FAFSA is also required for Pell grants from the U.S. government. You do not need to complete the FAFSA if you plan to get private student loans or a personal loan for college expenses.

On the FAFSA, your EFC refers to the Expected Family Contribution and measures the financial strength of your family. This number plays a role in determining your amount of financial assistance. If your EFC is zero, then you likely qualify for a full Pell grant, plus other forms of financial aid. You can qualify without a score of zero; your Pell grant may just get reduced if your income is higher.

You can get a private student loan with bad credit, but not as easily as you can get a federal student loan. Federal loans don't require a credit check, but most private lenders perform one. You generally need a FICO score in the 600s to get a private loan, but some lenders accept scores as low as the mid 500s.

A lender may require a cosigner for a private student loan for several reasons. Expect to need a cosigner if you have a low FICO score, limited income or a credit history with recent blemishes.

Your parents can take out private student loans for you if you're okay with it. Keep in mind that if something happens to your parents, you might be liable for the full balance. Some lenders don't discharge loans when a death occurs.

You can request federal loans if you change majors, such as switching to a nursing program after completing part of a teaching degree. However, lifetime limits still apply. Over the course of your lifetime, you cannot receive more than $31,000 as a dependent student, $57,500 as an independent undergraduate student or $138,500 as a graduate student.

You can't cancel student loans that you have already spent. However, you have a limited time to withdraw your request for federal student loans if your loans have not already been funded.

Learn More About Student Loans

Receiving a quality education is an important investment that can benefit you for the rest of your life. The right degree makes you a prime candidate for top-notch jobs, whether you plan to teach children or work in a hospital. Unfortunately, the costs of post-secondary education are often high. That’s why many students request loans for tuition and other essential school supplies.

Understanding student loans requires plenty of research unless you have a trusted team like Lendzi on your side. The knowledgeable advisors at Lendzi can help you meet your educational goals by explaining all of your options. Contact us today and let us know how we can best serve you. We’re here for you, whether you’re requesting a personal loan for textbooks or debating whether student loan refinancing is right for you. We work with all credit types and look forward to helping you tackle your education goals.

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