Direct Subsidized Loans are the Best Student Loans.
In the world of student loans, some are better than others. Direct loans are federal loans with better terms than private ones. Interest rates are much lower - fixed at 4.66 percent for undergraduates for the 2014-15 academic year - and may be tax deductible. You do not need a co-signer, and the repayment options are far more flexible than they are for private loans.
Differentiating Types of Direct Loans.
1. Direct Unsubsidized Loans
Interest on these loans begins to accrue immediately. So $12,000 in unsubsidized loans could easily amount to $13,000 or more in debt after four years of college.
2. Direct Subsidized Loans
The federal government pays the interest while you are in school (must be at least a part time student) and for the first six months after you leave school. So $12,000 in subsidized loans is still only $12,000 in debt after four years of college. How can your students limit their student loan debt to Direct Subsidized Loans? First, they could consider attending a community college for the first two years. Average tuition is less than the borrowing limit for subsidized loans, which is significantly higher in the third year of college and beyond. These schools work with local state colleges and universities to transfer to a bachelor's degree program through an articulation agreement. Another way is to apply for as many grants and scholarships as possible to bring the cost of a four year institution down. Public schools are generally a cheaper option for students look
3. How Much Can You Borrow?
First-Year Undergraduate Annual Loan Limit
$5,500—No more than $3,500 of this amount may be in subsidized loans.
Second-Year Undergraduate Annual Loan Limit
$6,500—No more than $4,500 of this amount may be in subsidized loans.
Third-Year and Beyond Undergraduate Annual Loan Limit
$7,500—No more than $5,500 of this amount may be in subsidized loans.
Remember the Ultimate Goal: Graduation!
The one factor that makes any student loan a bad one is failing to graduate. If a student loan is an investment in your students' future, dropping out is like the bank foreclosing on a mortgage. But in this case you still have to pay off the loan on the house that you lost.
When it comes to finding a job after college, I think the under-sung fact is that students need to be pragmatic when selecting a degree. Knowledge of careers and local and regional job projections can be important for helping students pick degrees that will help them find work right out of college.