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Time English (United States) Language 2 Action
00:06
When you began college, you likely had the option of financial aid.
00:09
This aid might have been needs-based, it might have been grants,
00:11
and it might have been loans.
00:12
Hopefully, whatever kind of aid you got involved an intake interview
00:15
or counseling session so that you could understand all of the terms and agreements.
00:19
But sometimes that doesn't happen…
00:20
and even if it did, that was a couple of years ago.
00:22
But let’s not doubt ourselves.
00:23
We’re smart! We’re getting a college degree.
00:26
Some of us can interpret Hamlet’s soliloquies.
00:29
And if we can handle Shakespearean prose,
00:30
we can handle modern finance jargon like “forbearance” and “consolidation.”
00:34
Student loans can feel like a lot to deal with,
00:36
but they don’t need to be incomprehensible.
00:38
We just need a little study session.
00:39
Hi, I’m Erica Brozovsky, and this is Crash Course: How to College.
00:42
a Study Hall series presented in partnership with Arizona State University.
00:46
Today we’re going to talk about how to pay back our student loans.
00:48
[INTRO MUSIC PLAYS]
00:57
Okay, time to study some vocab.
00:59
Everyone’s situation is different, but by the end of this episode,
01:01
you’ll have a cheat sheet, or study guide for paying back your student loans.
01:04
And like any other technical class with a lot of specialized language,
01:08
you might find it useful to take notes.
01:09
So this would be a good place to pause and grab your favorite note taking technology.
01:12
The first thing to remember is to always ask questions.
01:15
Remember that just like in the classroom, there are no stupid questions.
01:19
We took out the loans, so we should understand them.
01:21
And one of the first places we can take our questions
01:23
will typically be our college’s financial aid office.
01:26
They can tell us how much we owe, and who we owe it to.
01:28
In fact, before we graduate, our school is obligated to offer us exit counseling,
01:33
which lets us learn about our student debt and ask any questions we might have.
01:36
It’s typically an online tutorial students complete on their own,
01:39
so it’s important that if you have questions,
01:41
you talk to an actual person in the financial aid office before you graduate.
01:44
Exit counseling can also help us understand some basics.
01:47
Like the amount we borrowed when we first took out the loan is called the principal.
01:50
And all loans also have an interest rate,
01:52
which is like the cost we pay to whoever loaned us money
01:54
[-- as great as that would be, they didn’t do it out of the goodness of their hearts!].
01:57
When we pay back our loans, we’ll have paid off both the principal
02:00
and the accrued interest.
02:01
Now, there are a couple of different kinds of federal loans that may have been
02:04
offered to you when you enrolled in college.
02:05
If you’re a new or recently graduated student,
02:08
you may have had access to Direct Subsidized Loans,
02:10
Direct Unsubsidized Loans (also known as Stafford Loans), or Direct Plus Loans.
02:14
A Direct Subsidized Loan is available to any undergraduate student with financial need.
02:18
We talk more about financial aid in Episode 5,
02:20
but the important thing to know here is that if you are offered a subsidized federal loan,
02:24
the government will pay the interest as long as you are in school at least part-time;
02:28
for the first six months after you leave school–which is known as a grace period;
02:31
as well as during any deferment periods, which is when your loan payments have been postponed.
02:36
A Direct Unsubsidized Loan, on the other hand, is available to any student who wants one.
02:40
This is not a needs-based loan, although how much you can borrow
02:44
is determined by your school, what year you’re in, and other factors.
02:47
You as the borrower are responsible for paying all of the interest on this loan,
02:50
and the interest starts accruing immediately.
02:52
There are also Direct Plus Loans.
02:54
These are made to either the parents of undergraduates
02:56
or graduate or professional students.
02:58
Eligibility here is based on a credit check;
03:00
if you’re an undergraduate who is dependent on your parents
03:02
and they can’t receive Plus loans, you may be eligible for more
03:05
Direct Unsubsidized Loans.
03:07
The same is true if you’re an independent undergraduate student;
03:10
if you’re not dependent on your parents,
03:11
you won’t have access to the Direct Plus Loans,
03:14
but you may be eligible for a higher amount of a Direct Unsubsidized Loan.
03:17
For you returning students who have done college before,
03:20
you might be thinking “okay, I remember Stafford Loans - where are the Perkins loans?”
03:23
I’m sorry to be the bearer of bad news,
03:25
but the last Perkins loan was distributed in 2018 and the program no longer exists.
03:30
Likewise, Federal Family Education Loans haven’t been around in a while.
03:33
Probably the most important thing to understand about making
03:35
your federal student loan payments is that although you’re borrowing
03:38
money from the government,
03:39
a third-party loan servicer has been hired to manage billing,
03:42
invoicing, payment tracking, and more.
03:44
To find out who your servicer is, you can visit the studentaid.gov website.
03:47
And it’s important to keep track of what you owe even while you’re in school,
03:50
because those loan payments are on the horizon,
03:52
even if it doesn’t feel like it.
03:54
That six month grace period after you graduate,
03:56
where you don’t have to start paying your loans?
03:57
Well, it goes by fast.
03:59
Paying back loans has a significant effect on your credit score.
04:02
Each person has one, and it tells banks and other lenders
04:05
how likely it is you will pay back a loan on time.
04:07
You can check yours with a third-party service or through a bank that you use.
04:10
A good credit score can help us get other loans, buy a house, or rent an apartment.
04:14
Your score goes up when you reduce your debt and make timely payments.
04:17
Of course, sometimes life happens and this isn’t possible.
04:21
In these cases, it’s possible to put loans on forbearance, or delay making payments.
04:25
It’s also possible to defer payments in other circumstances as well.
04:28
For example, if you go to graduate school,
04:30
you can defer until you are finished earning your next degree.
04:33
Just be aware that if you do that, your interest may still accrue.
04:35
This is one reason why it’s never too early to start making payments.
04:38
You can chip away at your loans when they are on forbearance
04:40
or even when you are still in school.
04:42
It’s sort of like washing a couple dishes when you have down time.
04:44
Paying down $100 when you have extra is a great habit, because over time it adds up.
04:49
If we don’t make payments on time, we eventually have to default,
04:51
meaning we’ve failed to pay back the loan.
04:53
This is terrible for our credit and can cause major problems in other areas of life
04:57
(like renting an apartment or financing a vehicle).
04:59
So deferring loans when possible and chipping away at them is the best option.
05:02
Let’s go to the Thought Bubble.
05:04
Casey graduated from Crash Course State College six months ago.
05:07
She’s been getting reminder letters from her loan servicer
05:09
that her loans are about to come out of deferment
05:10
and she’ll need to start making monthly payments.
05:12
To make sure she doesn’t fall behind,
05:14
Casey can make a budget to manage all of her financial commitments.
05:17
She needs to factor in her loan payments along with medical expenses,
05:20
rent payments, and necessities like food and transportation.
05:22
After looking at the suggested repayment plans,
05:24
Casey’s still a little confused about how much she owes and when.