Financing your Education
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Federal law mandates the maximum interest rate that can be charged to federally guaranteed student loans. Private student loans, however, are based on the rate agreed to with the lender and frequently are based on credit history. While most student loans do not enter repayment until six months after graduation, some loans still accrue interest during your school years. Some new graduates are surprised to learn that their balances have drastically increased while they were in school and they now owe much more than they borrowed. Loans that do not accrue interest are frequently called “Subsidized,” whereas their interest accruing cousins are “Unsubsidized.” Students can manage their unsubsidized loans by making monthly interest payments while they are still in school. These nominal payments will keep the balances (which determine the interest) low. Before student loans are utilized, students should be sure they have maximized all grant and scholarship money available to them. Students should realize that student loans are a debt they must repay, even if they fail to graduate. Federally guaranteed loans are a debt that usually cannot even be included in bankruptcy claims, so students will have to repay them under most circumstances. The good news is that you are frequently able to deduct your student loan interest expense from federal income taxes. It must from a qualified loan. Since it is an adjustment to income, it is not even required to itemize tax filing to claim the deduction. See your tax advisor for more information. Furthermore, financing your education can be a very wise decision. Since college graduates earn more than those without, the repayment on the loan is very reasonable. |