How to explain student loans! on financial loans, Stafford loans, loan forgiveness, Perkins loans, loan debt, and more!


How Student Loans Work

student loans Tyler Oakley
Student Loans Tyler Oakley

Have you guys ever heard of Tyler Oakley? Well, Tyler Oakley has heard os student loans, cuz he had 'em. Big time.

And so he and his friends at Big Frame have asked us to make this for you to explain how student loans work so you know, you guys can have a slightly better life vis a vis (?) student loans than Tyler did.

Cuz from what I understand, he and his friends found it very confusing being that they're humans and everything.

So how do student loans work, and how can you make them work better for you?

Part 1: The FAFSA

AKA Free Application for Federal Student Aid. Now before you actually start looking for loans, you're gonna want to fill one of these babies out, either online or on a paper form, which apparently is still a thing. Did you? I didn't. In any case, huh?

Quick note: filling out the FAFSA is FREE! Free! Never pay any scammers who are trying to get your money to fill it out. Go to FAFSA's government website, not FAFSA.com because those guys... something's fishy.

In addition to being used for federal financial aid, the FAFSA is also used by state and school-funded programs, such as scholarships. Now if you’re in high school, rock, and roll, high school here, it's the hippest place in town. Look at me, I'm not a 31-year-old man, I'm so hip.

I think you can tell. If you’re in high school then you’ll definitely want to fill this out as soon as possible after January 1st during your senior year. If you’re not in high school, you still do want to fill it out as soon as possible after the New Year.

I do want to take a second to emphasize how important this is. Most financial aid is given out on a first come, first served basis even though it is determined by different factors. So the sooner you can get that FAFSA in, the better your chances of getting the maximum amount of aid available to you. And alas, this is not a one-time thing, either.

Even when you're in school, you have to keep filling it out every year. This is because, you know, your circumstances might change. One of our lovely Tumblr readers said that you can get help from the financial aid office which makes a lot of sense and we would highly recommend that.

Important:  czland

To actually fill it out your FAFSA, you’re gonna need some documents. There are lots of different ones, so right now that information is just floatin' around my face right now because of powers. Also, don’t leave any blank space on the form, if something doesn't apply to you, just write zero or not applicable and then you're done, you know. Just wrap that baby in a blanket and smack it on the bottom, cuz we're going on to--

Part 2: Types of Loans

After submitting your FAFSA, there are going to be a number of different loan options.

These include:
1. Stafford Loans – These are offered directly to you, the student, from the US Department of Education. They can be used to pay for many different kinds of higher education. Stafford loans will either be subsidized or unsubsidized, based on your financial need. Subsidized loans mean you don’t have to pay any interest on the loan while you’re still in school at least half-time. If your loan is unsubsidized, you begin accruing interest on the first day you receive your funding.

2. PLUS Loans – AKA “Parent Loans for Undergraduate Students.” These loans are offered to the parents of students by the US Department of Education to help fund their child’s education. PLUS loans are limited to the actual education expenses minus any other financial aid received by the student.

3. Perkins Loans – Perkins loans are available for undergraduate or graduate students. These loans are financed by your school but are guaranteed by the federal government. Perkins loans are based on your financial need and have caps of $27,500 for undergrads, and $60,000 for graduate students.

When weighing your financial options, PLEASE be sure to look at your interest rate. Even decimal points of difference can add up to huge amounts over the 10, 20 or whatever years during which you're going to be paying your loans. So read that fine print baby!

Depending on your situation, you may also need to apply for private loans. These are kind of tricky. Private loans typically charge higher fees and more interest, but we do know that they might be the only option in your case. More info in the dooblydo.

Important:  czland
Part 3: Repayment

Hey, check out that fancy piece o’ paper in your hands! Whoa mama! Aooga! Time to pay for it. You're gonna have a few different choices of how to pay your loans back.

1. Original terms - You can repay based on your loan’s original terms. This is typically a 10 to a 20-year repayment plan and it is the most common method.

2. Income - Based Repayment. This is the second most common type. The terms of your original loan are restructured to fit into your budget based on your current level of income. You will need to reapply every year for this type of repayment, because your income may be changing year to year, hopefully going up. Up, up, up, to the moon!

3. Deferment - If you can't afford your student loan payment, in some cases you can defer it. Deferment doesn’t get rid of your student loan debt, it simply puts off when your repayment plan begins. It’s usually only granted to current students, citizens in the military, or if you’re unemployed or are earning less than the minimum wage. Unsubsidized loans will continue to accrue interest during deferment, so it’s a good idea to make any payments that you’re able to.

4. Consolidation Loans – If you’re now out of school and find your current repayment plan difficult to manage, you can always consolidate your loans. Consolidating will take multiple loans and simplify them into a single new loan.

This can make repayment simpler and can extend your repayment terms up to 30 years, which will lower your monthly payments but will greatly increase the amount of interest you pay over the years. It is super duper important to stay on top of your student loan payments or to work with a loan servicing company if you know that you can't make your payments, do that as soon as possible.

Also, student loan debt does not automatically go away. Even if you file for bankruptcy! What the crap? Only under very special circumstances are you going to have these loans forgiven? One of those circumstances is death. So you die, but you don't have to pay. Every cloud...

Important:  czland

You may actually be able to get your loans reduced or completely forgiven if you choose to work in the public sector. You may still have to may 120 on-time monthly payments before your remaining balance is forgiven, but this is a great option for local, state, and federal government employees.

Part 4: A Note for Parents

Hi parents! It's nice to see you around here. You're looking nice. Would you like this gift card for Chili's? Or these tickets to your Billy Joel concert? Or would you like... what's another thing grown-ups like? I'm a grown-up (record scratch) Existential crisis! According to Forbes, more than half of all student loans are either delinquent or in deferral.

These loans can be for staggering amounts, so if you do choose to help pay for your child's college education, saving early is A+++. The IRS actually wants you to help pay for your child's education, so they have something called a 529 Savings Plan, which is kind of like a Roth IRA for saving for your bebes’ future. Not everyone has parents who are going to be able to help, but I do want everyone to know this option exists to help.

Part 5: Tyler Oakley

I'm so excited about this that I spit. I spit in the rainbow arc, with the bad French accent that goes to Italian sometimes. Tyler, you make me speak in tongues, you make my should dance, you make my liver quiver.

I don't know what to say to you except Thank you so much to Tyler Oakley and friends for suggesting the topic of this week's video. In return, I'm so happy to tell everyone that HowToAdult will be donating ad revenue from this video to the Trevor Project.

The Trevor Project is a 24-hour hotline and resource for crisis intervention and suicide prevention services to LGBTQ young people from ages 13-24. Tyler has supported the Trevor Project for years. It's very near and dear to his heart and to ours, so this is just our way of paying it forward.

Thank you so much Tyler, we heart you. If you guys are looking for a model of awesome adulthood, Tyler Oakley is pretty hard to beat. We'll see you guys next week. I love you bye.


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