One Way To Make Parent PLUS Loan Payments More Manageable

Posted on October 24, 2014 by:

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piglet and louie sleeping

Piglet and Louie are not eligible for Parent PLUS loans.

Helping people understand student loans is our job at SALT™, and few are better at it than Betsy Mayotte—the director of regulatory compliance for American Student Assistance® (our parent company). We told borrowers to “Just Ask” her questions, so check out her answers below (as well as her cat—because if Piglet can’t make student loans better, what can?).

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Parent PLUS Loan Repayment

I have put two of my kids through college and I’m left with a little over $200,000 in Parent PLUS loans to repay. I don’t know how we are going to do this. My husband and I both work but have very little left over every month. Now, I’m very worried that we will not be able to pay for basic bills. We have good credit, but we are worried that we will default on these loans. They are currently in deferment/forbearance, but we know we can’t delay much longer and need serious help! Thank you!

I’m so glad you reached out. Parent PLUS loans are eligible for an option called income-contingent repayment (ICR) that could make your payments more manageable—but only if you consolidate these loans.

ICR bases your payment on your income, and it offers to forgive any balance left over after 25 years of consistent payments (or 10, if you work for a nonprofit or are a state, federal, or local government employer). You can get an idea of what your payments would look like under this plan here. Keep in mind that you do have to apply to use ICR.

If you’re interested in this option, you would first consolidate your PLUS loans at www.studentloans.gov. Then, you could use the online application at the same URL, or you can fill out an application form to send to your servicer.

Rehabilitating Defaulted Student Loan

I REALLY need to rehabilitate my default. Last year, I was told I could rehabilitate my default with nine payments of just over $500. Now, my rehabilitation option is over $1,000 a month. That seems so unfair. I am trying to do my best. PLEASE, please give me some options: consolidation, a lower rehabilitation amount, ANYTHING. I need my taxes and wages to make ends meet. I do not want to lose my home or vehicle.

I’m sorry to hear about your situation. There was a change in rehabilitation regulations last year, but this actually should make your payments more manageable—not double them.

The way rehab works now is that you are first offered a payment that is 15% of your adjusted gross income, minus an allowance for your family size. If you cannot afford that, you can request a financial hardship form from your loan holder. This will allow them to consider your full financial situation when determining a payment amount. Once you receive these two payment options, you can choose whichever works better for you.

You can read more about getting out of default here. Contact your loan holder to start this process, but let me know if you have any additional questions.

Have a student loan question you need an answer to? Just Ask.

(Note: The questions and answers above are real; however, they have been edited for grammar and clarity, but not by Piglet.)

3 Questions To Answer Before Applying To Grad School

Posted on October 20, 2014 by:

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GMAT book on table in coffee shop.

And, you know, try not to stress out too much while studying.

Going to grad school was one of my better life decisions. As an undergrad, I went from a fashion design major … to a business major … to a degree in international affairs (I wasn’t exactly the most focused student).  For me, capping off a liberal arts education with an MBA was a good investment—and it definitely helped me land a great job.

However, grad school isn’t for everyone. Before you apply to any schools, consider the following three questions. With many schools’ application deadlines looming in December or January, now is the perfect time to answer them.

***

1. Do You Know How Much It Will Cost You?

Let’s be frank: The cost of grad school is a major concern. Not only from a tuition standpoint, but also from a lost-salary standpoint (especially if you leave a job to go back to school).

You might want to consider a part-time or weekend graduate program, so you can earn money while in school. And, if you can, consider living with mom and dad to save on living expenses.

Now, there are many loans out there, including Grad PLUS loans. However, before you take those on, check into scholarships or fellowships related to your field and keep in mind how much you’ve already borrowed to date.

2. Can You Wait?

When jobs are tight for recent college grads, graduate school enrollment goes up. But going to grad school is an expensive way to fill time while waiting for the economy to get better.

If you can hold off on applying for a few years after getting your undergraduate degree—no matter what job you initially land—that experience will help you select a program that best fits your interests and skills. (Not to mention that the salary will come in handy paying for it too.)

And some admissions officers  prefer applicants that have work experience. So, working a few years, even at a minimum wage job, may help get you admitted.

3. Have You Completed Everything You Need To?

With application deadlines coming up, staying on top of your application details this fall is key.

  • Transcript: This month, request your official transcripts from your undergraduate institution.
  • Recommendations: Check that the professors writing recommendations for you have everything they need, such as your résumé. This will help them write a great letter on your behalf.
  • Testing: You may have already taken your entrance exam a few times (GRE, GMAT, etc.). But if you need to retake it, sign up now. Not all tests are offered all the time. And you may need some time for more test prep (I know I did). Decide whether you want the scores sent directly to the schools or plan to send them later.
  • Personal statement: Keep working on drafting your personal statement, and have someone proof it. Typos can be a real destraction …
  • Hit send early: Many grad programs offer rolling admissions. So, if you are first in the gate, you have a better shot at getting admitted. Get your full package together—and double-check that your professors submitted their recommendations. Once your application is complete, getting it out early will help.

Waiting It Out

After your applications are out the door, hopefully you can celebrate! The results can take several weeks, so enjoy the “no news is good news” stage.

For me, I only applied to one school, so it’s a really good thing I fit the profile. Who knows how different my life would be if I hadn’t gotten my MBA? And by waiting a few years between undergrad and grad, I was totally ready to head back to the classroom by the time I got there.

What did you consider before applying to grad school? Tell us about your experience in the comments.

(Photo: bitslice cipher)

“You Can Just Hear The Relief In Their Voices”

Posted on October 15, 2014 by:

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Maloney in front of waterfall

Maloney is a senior counseling specialist.

Think you don’t have options when it comes to your student loans? That may not be the case. Aaron Weber spoke with Maloney, one of our senior counselors, about common student loan problems and how to solve (or even prevent!) them.

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What’s the most common question you get when you talk to a student loan borrower?

Honestly, a lot of people don’t even know what to ask. They say, “I can’t pay. What do I do?”

My favorite calls are when someone calls in stressed out and we’re able to tell them about a repayment option they didn’t know about.

Most people have a lot more on their plate than just student loans, and [loans] seem scary and impossible to deal with, so they avoid it. When they find out that they can manage it, and that we can help them, you can just hear the relief in their voices.

What are some common misconceptions people have about student loans?

Well, a lot of people don’t know who’s who. They know servicers and sometimes collection agencies call them and ask for money, and that’s pretty much it. “Bills,” basically, is what they see.

They don’t know that SALT™ isn’t a collection agency or a servicer. We’re not sending bills, you know? We’re here to help. Once they figure that out, though, it’s really gratifying.

Sometimes, they’ve done a little research and think they don’t have any options. They’re working so they can’t use unemployment deferment, but they don’t make enough to cover their student loans, and they think that’s it. But they could use economic hardship deferment—or income-based repayment.

Income-based repayment really is something that not enough people know about. Or they have heard of it, but don’t know that it works even if you don’t have much income (a low income means a VERY low payment—potentially as low as zero dollars). And that it includes a forgiveness option, even if it does take a long time to qualify for it.

What do you know now that you wish you’d known when you were applying for college?

When I was applying to college, I didn’t know the difference between federal and private student loans. I just wanted to go to college, move out of my parents’ house, and be independent. I didn’t know that I could get a much better value going to college in state, so I just signed anything I could to get to school. I’ve been able to manage it, but it would have been a lot easier if I’d known what I was doing.

My nieces and nephews are juniors and seniors in high school right now, and I’m sending them links to the scholarship search on SALT, and talking to them about different in-state schools, helping them make choices with both eyes open. One of them wants to go to college in California, and it might be a good fit, too. If she goes, though, she’ll know how much it costs and have a good plan for paying it back.

Have a question for a student loan counselor? Leave it in the comments!

Upcoming College Scholarship Deadlines: November 2014

Posted on October 6, 2014 by:

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"Luck and Pluck" book cover.

Horatio Alger’s books were all about going from rags to riches. Could his scholarships help you do the same?

To make your scholarship search a little easier, we’ve put together a list of scholarships with deadlines in November 2014. Be sure to read through the eligibility requirements carefully and visit the scholarship provider’s website before applying.

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The National AIDS Memorial Young Leaders Scholarship Program

Scholarship Deadline: November 1, 2014

This $2,000 scholarship is being offered to students who are committed to fighting AIDS. Examples of such commitment include providing peer-based prevention and education, advocacy, or activism as it pertains to the AIDS disease, participating in public awareness campaigns, and/or practical, emotional, or treatment support for those people living with HIV/AIDS.

In addition to the advocacy requirements above, students must meet the following eligibility requirements to apply for this award:

  • Must be a current high school senior or college undergraduate
  • Must demonstrate an active commitment to fighting AIDS

The Proof-Reading.com Scholarship Program

Scholarship Deadline: November 1, 2014

This scholarship awards one $1,500 award to the student who writes the best essay on the following topic:

“Many Americans are pondering important questions that surfaced after the recent NSA surveillance controversy. How secure are we as Americans? What is the government’s role in our “security,” and to what lengths should they go to ensure it? Please discuss the costs/benefits of these issues, how they lead to problematic links between government and business, and the role whistleblowers play in America’s security surveillance discussion.”

The essay must be a minimum of 1,500 words; there is no maximum word count. Entries will be judged on grammar and your ability to present your ideas clearly.

To apply for this scholarship, you must meet the following requirements:

  • Must be pursuing a degree at an accredited institution in the United States
  • Must be a full-time student
  • Must be a legal resident of the U.S. or able to provide a valid green card
  • Must maintain a cumulative GPA of 3.5 or higher

The BBG Communications Youth Volunteer Scholarship Award

Scholarship Deadline: November 29, 2014

The BBG communications scholarship awards $500 to the student who demonstrates a passion for volunteering while maintaining an excellent academic record. The scholarship requires a 1,000 word or less essay on the following topic:

“Explain why you have chosen to volunteer your time with the organization(s) that you have and how your experience has changed your life.”

To apply for this scholarship, you must meet the following requirements:

  • Must have completed at least 50 hours of volunteer work in the last two years
  • Must be under the age of 21 by the application deadline
  • Must maintain a cumulative GPA of 3.5 or higher

The Horatio Alger Association

Scholarship Deadline: Varies

The Horatio Alger Association offers hundreds of scholarships to students across the United States. The organization offers more scholarships than we can list here!

Click on the link above and you’ll be directed to the organization’s “find a scholarship” page. There you can click on your state of residence and view information on scholarships that are available to you. The 2015 scholarship programs are open for applicants starting on August 1 2014, with deadlines in early spring 2015. That makes November the perfect time to work on your application!

Happy hunting!

For more information on college scholarship deadlines in 2014, including our scholarship of the month feature, check out our post on Upcoming 2014 College Scholarship Deadlines

(Photo: Wikipedia)

20 Ways To Find College Scholarships [EXCERPT]

Posted on October 3, 2014 by:

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Woman lying on ground surrounded by books.

Click through to read the full article.

Diane Melville is one of the most popular contributors to this blog—that’s what happens when you peddle free money for school. So, of course, one of the most popular questions she receives is, “Where can I find that free money for me.”

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There’s no one-size-fits-all answer to that question. One student may have luck with scholarship search engines, while another may strike gold talking to a school guidance counselor. Ultimately, there are a lot of different places you can find scholarships for college—and Diane has done her best to document them all in a new article for saltmoney.org.

Check out this excerpt of it, and then click through to find all 20 places she recommends looking. This article is only for SALT™ members, but signing up is 100% free!

College scholarships are everywhere—you just need to know where to look.

Unfortunately, no one website, book, or company has a list of every scholarship available. With that said, students who are interested in winning scholarships must be willing to try different strategies and search in many places to find an award for which they are eligible.

To help you do that, we put together a list of 20 strategies students can use to find college scholarships. This list is far from exhaustive, so feel free to get creative and try other scholarship search strategies not listed here.

View Full Article

SALT is a free, nonprofit-backed educational program that helps every student who wants a college degree to get it in a financially responsible way. SALT’s neutral advice, practical information, and interactive lessons help students gain money knowledge for college and beyond, keeping them on the path to success. Learn more at saltmoney.org.

“Do I Need To Hire Someone To Handle An IBR Application?”

Posted on October 1, 2014 by:

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Piglet at the vet getting haircut

Piglet wishes she could get these services for free (or perhaps not at all).

Helping people understand student loans is our job at SALT™, and few are better at it than Betsy Mayotte—the director of regulatory compliance for American Student Assistance® (our parent company). We told borrowers to “Just Ask” her questions, so check out her answers below (as well as her cat—because if Piglet can’t make student loans better, what can?).

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Paying For Help With Income-Based Repayment

Do I need to hire someone else to handle an IBR application or can I do it myself? I just received an email offering to assist me, and I don’t know if it’s a good idea or not. The fee seemed high and not really affordable to me. I’ve received quite a few pushy phone calls from this company.

While there’s nothing illegal in charging a consumer to help them manage the paperwork for their student loan, you don’t have to pay for such services. You can get the same help and access the same programs for free through your loan servicer or a free service (like SALT™).

What troubles me about the email they sent was the deceptive nature of the text, which implied that your loan holder cannot or will not offer the lower payments or other options that this company can. That is simply untrue. Federal student loans are heavily regulated, and no one can get you a lower payment or other option that you can’t get—or won’t have access to—for free through your loan holder.

I know you were interested in income-based repayment. You can find the application for that plan here or, likely, on your servicer’s website. You can also call your servicer to ask them to send an application to you. Ultimately, the payment you get under this program will be the same—whether you fill out the application or whether this company does so for you for a fee.

As far as this company goes, due to the deceptive nature of this email, you may want to consider forwarding it to your local attorney general’s office or the Consumer Finance Protection Bureau at www.consumerfinance.gov.

Too Much Interest Accruing On Loans

I just had my loans consolidated. I have approximately $72,000 in student loan debt. According to my new payment plan, I have to make $426/month payments for 358 months. By the time it’s paid off, I will have paid $153,963! I make $40,500 a year. What should I do? Does this seem right? Are there any options? Any other companies? Please help.

When I calculated your payment, I got lower numbers—but I also don’t know your interest rate, so you may want to use this calculator to do so yourself. That can help you tell whether these numbers are right or not.

I’m assuming these are federal loans, so moving companies won’t do you any good as Congress sets the terms and interest rates of these loans. These are simple interest loans, so the longer you take to pay them off, the more you will pay in interest.  Assuming your income increases over time—and especially if you pay extra when you can—I’m confident you will pay this loan off sooner than the time given, and with a lesser amount of interest.

My advice to you is to make a budget, be strict, and see how much you can devote to these loans monthly. I’d also try to commit to throwing every bit of extra cash—such as tax returns or those months that you get an extra paycheck—at the debt. You’ll be pleasantly surprised at the difference it makes.

Let me know if you have additional questions.

Have a student loan question you need an answer to? Just Ask.

(Note: The questions and answers above are real; however, they have been edited for grammar and clarity, but not by Piglet.)

Taking A Year Off From School? Learn These Life Lessons During Your Break

Posted on September 25, 2014 by:

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Denali

Out here, you can definitely learn a few things they don’t teach in a lecture hall.

Last summer, I dropped my son at the airport for a flight to Anchorage, Alaska to embark upon a journey thousands of miles away. With a job lined up at a hotel in Denali National Park that included room and board, he began a year seeking an “alternative form of education.”

That is, he quit school.

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If you paused your formal education this semester, you could be on a valuable odyssey. Spending time in the “real world” will teach you some lessons—and my son certainly had his highs and lows. Still, if you asked him if this experience was worth it, the answer would be an emphatic, “Yes!”

If you’re taking some time off now or thinking about doing so in the future, consider doing the following to gain some perspective on your experience.

Meet People With Different Backgrounds

During his time off, my son met all kinds of people. Some were in their mid-40s, stuck in “is this all there is?”-type jobs, due to their lack of a college degree. Others were permanent seasonal workers, trading low wages for a certain lifestyle. Then there was the guy who sat on his front porch, shotgun ready, in case some unfortunate soul accidently stepped on his property.

Ultimately, the world outside a college campus is full of people who didn’t finish college or even get the chance to go—try to talk to them about their experiences. Some people were very quick to tell my son that going back to school was a good idea. (This made a stronger impression coming from them than me, even if they weren’t holding a shotgun at the time.)

Consider Online Classes

When my son came back down to the “lower 48” last fall (to continue his education in knee-deep Colorado powder), I offered to help with his rent, if he agreed to take a few inexpensive online classes. Ultimately, the lack of face-to-face contact with his professor and fellow students made it hard for him to stay engaged. This motivated him to get back to an actual campus.

Still, taking a few classes during your time off offers a number of benefits. You can not only chip away at your degree, but you’re also able to learn on your own timetable, while possibly keeping the one-time, 6-month grace period for your student loans intact.

Deal With Adversity

While snowboarding in Colorado, my son broke his elbow riding a rail. (He was very glad this happened at the end of the season.) Since he was budgeting on his own, he was already painfully aware of the need for gainful employment. This injury showed him just how hard earning money can be when the unexpected trip to the ER happens.

With one arm in a sling, his job delivering sandwiches proved to be challenging; he could barely drive with one hand, let alone manage a GPS, ring a doorbell, and juggle change—especially with an armful of turkey subs and Diet Coke. Fortunately, necessity being the mother of invention, he found short-term employment videotaping his friends, riding the same rail that put him into a cast. (Go figure.)

Obviously, you can’t make the “unexpected” happen. But if you get a chance to face it during your time off, you’ll be better for whatever life throws at you—during school and after.

Have A Plan

If you are thinking about quitting school for a while, come up with a plan. Start with finding out how your school will handle your leave of absence. Then, talk to your parents. You don’t have to map out every minute of your time off, but if you leave everything to chance, your odyssey will not be all it could be.

Be sure to prepare for your return to the classroom, too. My son returned to school with a 4-week intensive program. Going from a part-time, online school to a fast-paced program was a total shock to his system. He managed to memorize 100 Latin plant names and everything else they tested him on, but it was clearly not easy to reintegrate as a full-time student.

With a little planning, this experience could be a life changing, alternative education. And it just may really stand out on your résumé someday.

Did you take a year off from college? What were some key things you learned that you couldn’t have been taught in a classroom?

(Photo: Nic McPhee)

3 Reasons To Think Twice Before Cosigning A Student Loan

Posted on September 15, 2014 by:

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Nice Pen With Cap Off

Before you pick up that pen, know what you’re getting yourself into.

Unless you’re a morlock and you’ve been living underground, you know that college isn’t getting any cheaper. Many students attending college bridge their financial aid gap with private student loans—and approximately 90% of those loans need a cosigner.

Have you ever cosigned for a student loan? Or has someone asked you to cosign for a loan? Better yet, do you know what cosigning for that loan really means for you? You should never take cosigning a student loan lightly. Let’s talk about why.

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You Are Ultimately Responsible

When cosigning for a student loan (or any loan for that matter), remember that if the borrower doesn’t pay it back, you are responsible—no matter what.

If the borrower can’t make the payments for whatever reason, you have to take up the slack or face negative repercussions like delinquency and default lines on your credit report, collection costs, and tarnishing your good credit name. So, ask yourself if you really can afford the loan payments, because you may have to make them someday.

In fact, if the worst happens and the borrower dies, you may still have to repay the loan. Unfortunately, these cases have popped up in the news lately and they aren’t pretty. If you do co-sign on a student loan, strongly consider having the borrower take out enough life insurance to cover these debts should the worst happen.

Credit Implications

For the entire life of that loan, your credit score will be affected—even though it’s not “your” loan. Before you yell “not fair!” remember that the lender considers you just as responsible for the loan.

This effect can be both good and bad. On-time payments will positively affect your score, but late payments will harm it. Also, having another loan you pay in installments affects your score. How much will depend on the rest of your credit report. In addition, the loan will impact your income-to-debt ratio, even if the borrower remains in good standing.

Remember that cosigning means you are effectively lending your good credit standing. Make sure that you are going in with your eyes wide open. (By the way, you can get a free copy of your credit report from each of the three major credit reporting agencies once every 12 months here.)

It’s A Matter Of Trust

Another piece of advice: make sure the borrower is trustworthy and someone you will be in touch with for the foreseeable future, just in case you start getting collections calls about that loan. Goodtime Charlie you see at happy hour who never has steady employment and is looking to go to a party school to live the “real” college life probably isn’t the best person for you to cosign for.

The bottom line is, if you wouldn’t lend them money, you shouldn’t co-sign for them. And you know what Judge Judy says: never lend money you can’t afford not to get back. On a similar note, you shouldn’t co-sign for money you can’t afford to pay back. Trust is a two-way street, guys.

Final Thoughts

By no means am I advising you not to cosign for your nephew who is an awesome biology student at a prestigious university. But, I am advocating that you consider everything before you sign that dotted line.

You may really help your nephew get a lower, more affordable interest rate to achieve his dream of becoming a doctor—and a doctor may really come in handy if he defaults on that loan along the way.

Did you cosign a loan for this semester? Let us know how you came to your decision in the comments.

(Photo: PDPics)

Why You Have To Break Free Of The Student Loan Shackle

Posted on September 11, 2014 by:

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shackle and chain

What’s holding you back?

For the past few months, I feel like I’ve been writing a preface to my future, instead of actually living it.

I’ve been staying at home with my parents, seeing the friends I grew up with, and working two cities away from where I was born. If I learned one thing in college, it’s that you grow the most when you’re uncomfortable. The past few months have been different, but all in all, a little too comfortable for comfort.

That’s all going to change soon, though, because I’m moving to New York City.

***

Over the past few years, I’ve chronicled many phases of my life on this blog: from intern, to Oxford student, to college senior, to “young professional.” From here on out, I’m going to profile my triumphs and tragedies in America’s largest concrete jungle—specifically as they relate to my wallet.

Moving was not a decision I made lightly, once again due to financial considerations. Or, more specifically, my student loans. However, I can’t let these hold me back, and you shouldn’t either.

The Student Loan “Shackle”

I’ve heard people compare student loans to a shackle, in that the monthly payments can keep you from chasing dreams or making big changes in your life. As a recent graduate with quite a few loans, I get how scarily accurate that analogy is.

So, is moving to the second most expensive city in the country with a considerable amount of student loan debt financial suicide? Not necessarily. I worked out the numbers before making any decisions (this is why having a budget is so important). After paying loans and rent, I’ll have money left over, but not so much that I won’t potentially have to make some tough decisions.

That doesn’t mean things aren’t scary, though. Am I going to starve? Move home after a month? Be miserable and tired? Flourish? Make mistakes? Make memories? I have no idea; neither does any new grad. But like me, you won’t know unless you try.

Freeing Yourself

Ultimately, I think student loan debt can only be a shackle if you allow yourself to see it as one. Now, I’m speaking from a position of privilege: I landed a job at a well-known NYC ad agency, and I have amazing parents who are willing to help me out if I fall and can’t get up on my own. I’m lucky, and not every borrower can say the same.

However, if you are also lucky enough to be able to chase your dreams despite loan payments, I think you should start running. I think you should start running even if it means you’re going to have to rough it for a little, or if your parents don’t agree with it, or if there’s a high chance you may crash and burn.

I think you should start running because you’re young once—and nobody owes their youth to a student loan company.

Where Do I Go From Here?

The short, not-so-vivid answer is into a tiny, overpriced apartment with some good friends and a brand new job with a lot of room to grow.

The more metaphorical answer? Into sink-or-swim territory. I’m going to do everything I can to keep my head above water. And my hope is detailing this will give college students and recent grads an unadulterated look at what “young professional life” looks like when you’re in a major city with major student loans.

If you’ve got any advice that can help me along the way, please let me know in the comments. I’m going to need it.

Post your tips for Mike below in the comments.

(Photo: lwr)

Do You Know The Essential Elements Of Your Student Loans? [INFOGRAPHIC]

Posted on September 10, 2014 by:

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Now that school is back in session, it’s time for our first pop quiz.

The topic? What exactly did you borrow to pay for this semester?

***

If you needed extra money to close your tuition gap, you may not have paid too much attention to what form it came in—you just knew you needed $X to cover your costs. And you know what? That’s understandable.

Ideally, you’d know “Perkins loans vs. Stafford loans” and “unsubsidized vs. subsidized” before you borrow. However, that doesn’t mean it’s too late to learn these differences! (It’s not like you have any real tests going on in September anyway.)

As your study aid, check out this infographic. It details the essential elements of your student loans: their interest rates and the maximum amounts you can borrow. Now, the next time you borrow, you’ll have all the information you need.

(Click image to enlarge.)

periodic_table_loans

Want even more infographics? Check out saltmoney.org.