PART I: Federal vs Private Loans



Paying for College COMPARE: Understanding the Types of Student LoansWith student loan debt being the second highest consumer debt category in the country, it’s understandable that many students are wary of taking out student loans. However, when used responsibly, student loans can be the key to unlocking a college education and brighter future. To make sure you are making financially smart decisions, you have to do your research and understand the types and conditions of the different student loan options available to you.The Consumer Financial Protection Bureau (CFPB) is a government agency whose purpose is to provide Americans with clear, accurate information to help them with financial decisions. In this activity, you are going to research the different types of student loans and make determinations about the right types of loans for you. Go to the CFPB’s “Choosing a Student Loan” page and follow the directions on this worksheet to complete the charts and answer the questions.PART I: Federal vs Private LoansOn the CFPB’s “Choosing a Student Loan” page, expand the section titled “Detailed Comparison of Federal and Private Loans” (screenshot here). As you read, summarize the major differences between Federal and Private student loans in the chart below.Element of the LoanSummarize the major differences between Federal and Private Student LoansHow to RepayInterest RatesWho Is EligibleLoan LimitsPART II: Types of Federal LoansNow that you’ve outlined the differences between Federal and Private loans, it’s time to look more specifically at Federal loans. There are three major types of federal loans: Perkins Loans, Direct Loans, and Direct PLUS Loans. On the same CFPB page, click on “Federal Loans Options” (right below the “Detailed Comparison of Federal and Private Loans”) and complete the chart below. If you want more information on the different types of federal student loans, you can watch this short video.Perkins LoansDirect LoansDirect PLUS Loans (Parent or Grad PLUS Loans)Who is Eligible?Subsidized or Unsubsidized?PART III: Types of Private LoansNow we’re going to look at private loans by click on “Private Loan Options” (next to “Federal Loan Options”). Read the text and answer the following three questions.What are three alternatives to pay for college that you should explore before taking out a private student loan? Why does the Consumer Financial Protection Bureau suggest you explore alternatives before taking out a private student loan?What are the three sources of private student loans?PART IV: Student Loans QuizFor these questions, use your knowledge of the differences between federal and private student loans to answer whether the statement is true for FEDERAL LOANS, PRIVATE LOANS or BOTH.There is no limit to the amount of these loans you can take out. These loans have a set interest rate that cannot change. You generally have six months after graduation to begin paying back these loans. Anyone is eligible to receive one of these loans. You will have to pay the interest on these loans while you are still enrolled in school. Federal Loans Quiz: Use your knowledge of the different types of federal student loans to answer each question._________________________ loans are reserved for the students with the greatest financial need. A subsidized loan is one where _______________________________ pays for the interest while the student is still enrolled in school. An unsubsidized loan is one where ______________________________________ pays the interest while the student is still enrolled in school. Which of the three federal loans types is available to the most people? Why? PART V: Student Loans ReflectionNow that you’ve reviewed all the different kinds of student loans, let’s reflect a little bit on what this means for students deciding what types of loans to seek.Why should every student explore federal student loan options before private loan options?What are three pieces of advice would you offer to a student who knows they will need loans to pay for college? ................
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