Student Loans: Borrow Smart

The story: Jade reads the loan offer

Jade and Alex read an aid offer that lists grants and two kinds of federal loans, then weigh needs against extras.

1. Narrator: Jade’s aid offer lists grants, work-study and two kinds of federal loans.
2. Jade: Subsidized and unsubsidized? Aren’t loans just loans?
3. Narrator: Subsidized loans don’t build interest while you’re in school. Unsubsidized loans do, from the start.
4. Alex: My cousin took a private loan with a cosigner. Higher rate, and fewer options when money got tight.
5. Narrator: Federal loans first. Then borrow only what you truly need. Borrowing for extras adds up.
6. Jade: I’ll check the monthly payment and the total I’d repay before I accept.
7. Narrator: Borrow federal, borrow less, know the total.

What you’ll learn

1. Federal vs private

   Federal student loans come from the government, with set rates and more repayment options if money gets tight. Private loans come from banks and lenders. They often need a cosigner and usually have fewer protections.

2. Subsidized vs unsubsidized

   Subsidized federal loans don’t build interest while you’re in school at least half time. Unsubsidized loans build interest from the start. Unpaid interest can be added to what you owe. That’s capitalized interest.

3. Limits, parents and rates

   Federal loans have yearly and total limits, set by law and your year in school. Parents can borrow too, under different rules. The fact cards link to current limits and rates, which change often.

4. Know the total

   Borrowing for living costs adds up fast. Before you accept, check the monthly payment and the total you’d repay. Repayment usually starts after you leave school.

   Example: $20,000 at 6% for 10 years is about $222 a month, or about $26,600 in total.

Key words

subsidized

a federal loan that doesn’t build interest while you’re in school

unsubsidized

a loan that builds interest from the start

private loan

a student loan from a bank or lender, not the government

capitalized interest

unpaid interest added to what you owe

Common questions

Do I have to accept every loan in my aid offer?

No. You can accept less than offered, or none. Many students accept grants first, then only the loans they need.

Remember this

Borrow federal, borrow less, know the total.

Try it: Run a sample student loan

1. Open the loan payment calculator linked in this lesson.
2. Enter the sample loan: $20,000 at 6% for 10 years (example).
3. Write the monthly payment and the total repaid. Then try borrowing $5,000 less.

The whole mission; no account or app needed.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• Federal loan limits: subsidized and unsubsidized

  Source: StudentAid.gov(opens in a new tab)

• Current federal student loan interest rates

  Source: StudentAid.gov(opens in a new tab)

• Repayment options

  Source: StudentAid.gov(opens in a new tab)