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Fulton Bank

Get Smart about Student Loans

Between tuition, books, fees and room and board, students and families are struggling to pay for college. Unfortunately, many students—and their parents—jump into student loans without understanding the basics. Here's some of what you need to know before taking on student debt.

Types of Student loans

Students taking at least six credits can take out student loans. Student loans come in two basic varieties — federal and private. Federal loans are backed by the government and in general, undergraduates can borrow up to $5,500 their first year, $6,500 their second year and $7,500 their third, fourth and fifth year. Students who are not claimed as dependents on their parents' tax returns can borrow higher amounts.1

Private loans, on the other hand, are issued by a bank or other lender and don't have a borrowing cap. Typically, these loans often require a co-signer.

Student loan interest rates

The interest rate for federal student loans is the same for all borrowers, however, it's reset every year in July. For the 2018-19 school year, the Annual Percentage Rate was 5.05% for undergraduate education and 6.6% APR for graduate or professional school.2

Interest rates on private loans vary and depend on a number of factors, including your income and your credit score.

Student loan repayment plans

While it may seem far off right now - after you graduate, you need to figure out how to fit your loan repayments comfortably into your budget. Federal student loans have a variety of income-based payment plans, so how much you pay is based on how much you earn. 

The most common repayment plan on private student loans involves a level payment for a fixed number  
of years, typically 7-15 years. Some lenders offer extended repayment periods of up to 30 years, 
depending on the amount of debt.3

A  majority of students who earn a bachelor’s degree need loans to help finance their college education.  But with a little research, you can find smarter ways to make sure which loan or combination of loans is right for you.