The Ultimate Student Loan Handbook
From applying for and managing student loans to refinancing and repayment, learn the ins and outs of education loans for healthcare students.
You applied for six different scholarships, but landed just one of them. Your employer offers tuition reimbursement, but it only covers one-quarter of your school expenses. This leaves a number of education bills you need to figure out fast.
Although scholarships and grants are the best form of school money since you don’t need to pay them back, student loans can help fill in the cost gaps in your college financial plan, if you follow the right steps. This guide not only helps you understand your options when it comes to taking out a student loan, but it also gives you insight into and advice on how to repay your student loans once you finish school. Read on to learn how to find the right lender, look into loan forgiveness, and finance your healthcare education responsibly.
Types of Student Loans
There are two types of student loans: federal and private. Federal loans are backed by the federal government and generally have lower interest rates while private loans are backed by banks, credit unions, and other private lenders. There are rules and regulations that students must follow in order to meet the terms of a loan. Let’s take a closer look.
The William D. Ford Federal Loan Program
Direct Subsidized Loans
Lender
U.S. Department of Education
Eligibility
Undergraduate student
Requirements
Financial need
Interest Rate
5.50% undergraduate
Loan Amount
Determined by your school, the amount cannot exceed your financial need.
Direct Unsubsidized Loans
Lender
U.S. Department of Education
Eligibility
Undergraduate or graduate students
Requirements
Do not need to demonstrate financial need
Interest Rate
5.50% undergraduate; 7.05% graduate
Loan Amount
Determined by your school and whether or not you are a dependent or independent student
Direct PLUS Loans
Lender
U.S. Department of Education
Eligibility
Parents of students, graduate students, professional students
Requirements
No adverse credit history
Interest Rate
8.05%
Loan Amount
Varies; Determined by cost of attendance minus any other financial aid received
Direct Consolidation Loans
Lender
U.S. Department of Education
Eligibility
Students with two or more federal education loans
Requirements
Submit online application
Interest Rate
Varies
Loan Amount
Varies; Combines two or more existing loans.
Private Loans
Unlike a federal loan, private loans come from credit unions, banks, or another private lender. While a federal loan is usually a better choice for students, it can sometimes be worth your time to explore your private loan options. Let’s look at the major private lenders.
Sallie Mae
Sallie Mae is a publicly-traded company that is a major provider of private student loans in the U.S. Sallie Mae’s undergraduate private student loans are best for those who want flexibility with repayment. For instance, Sallie Mae offers low interest rates to borrowers who make monthly payments of $25 or interest only payments while still in school. Sallie Mae also offers a dedicated loan program for graduate students pursuing a health profession.
Credit Unions and Banks
When researching private loans, it can be helpful to look to local credit unions that focus on undergraduate or graduate students that reside in your state. Depending on the lender, students can qualify for fairly low, fixed APRs, sometimes as low as 4.86%, and variable APRs around 3.75%. Some credit unions may focus on a particular population, such as military service members and veterans. The Navy Federal Credit Union, for example, offers helpful interest rate reduction opportunities and added perks such as discounts on auto insurance. Private student loans, including those offered through banks, are highly dependent on the applicant’s credit history. Depending on your credit history, you may need a cosigner to secure a loan.
Private Lenders
There are many private lending options out there for you to consider. While they may not offer interest rates as friendly as federal loans, you can often borrow $40,000, $50,000, or even $100,000 if needed. Many lenders are willing to set up loans with undergraduate and graduate students, although you might need a cosigner to help bolster your application. Be sure to read the terms carefully, as some lenders can charge high fixed APR rates in the 29-35.99% range.
Things to Keep in Mind
- Private loans may require a credit check
- The loan might come with fees
- You might need a cosigner
- Your interest may not be tax deductible
- No consolidation allowed
Federal vs. Private Loans
Federal Loans
What you need to know
Take advantage of your federal loan options before seeking private loans. Federal student loans almost always cost less and are easier to repay.
Benefits
Many federal student loans are subsidized and have fixed interest rates. Most students are eligible, and repayment terms are flexible.
Risks
The amount of money you can borrow is limited. Part of your wages and all of your tax refund could be taken by the government if you default on your loan.
Private Loans
What you need to know
Private loans are generally more costly than federal loans and offer little flexibility if you are having trouble making your payments.
Benefits
You can borrow larger amounts. If you shop around and can show ability to repay, you may be able to find low interest rates relative to certain federal loans.
Risks
Your interest rate and monthly payment could change with little warning and you have fewer options for when and how much you can repay. You typically need a cosigner to qualify and any late or missed payments will affect the credit ratings of both you and your co-signer.
How to Apply for a Federal Student Loan
Applying for a federal student loan doesn’t have to be a complicated process. Follow the steps and information on this list below to get started on your road to higher education.
Compile all the financial information you’ll need to apply
- Your parents’ gross income for two years prior to the academic year you’ll attend school
- Your parents’ tax returns from the same period
- If you file taxes, your tax returns from the same period
- Your parents’ Social Security number and dates of birth
- Any untaxed income, such as child support, retirement savings plans, etc.
- Assets and net worth of business or investments they or you might have
- A list of up to 10 schools you’re applying for
- Any grants or scholarships you’ve already received
(Optional) Complete your CSS profile
To find out if you’re eligible for institutional aid, you should apply on CollegeBoard’s CSS profile page. To do so:
- Sign up for a CollegeBoard account
- Go to CSSProfile.org and sign in with your CollegeBoard credentials
- Select “Begin New Profile”
- Select schools you wish to apply to
Fill out and submit the FAFSA®
This is a free form that you need to fill out to receive consideration for financial aid from the federal government. This is one of the most important steps in the process of applying for aid.
Review your Student Aid Report
This document will indicate your expected family contribution and supply you with a four-digit data release number. The schools that you listed on your FAFSA will use this information to determine your eligibility for both federal and non-federal financial aid.
Wait for your financial aid award letter
You will likely receive your financial aid award letter around the time you receive any college admissions decisions. In some cases, the letter may arrive as early as October or as late as April.
Determine amount to borrow
After you learn how much you will receive in financial aid; you must determine how much money to borrow. The best way to do this is to total your expected payments for tuition for the year, fees, and room and board expenses. Then, subtract your total aid from that number.
Accept the award letter
Once you determine what types of aid you will receive; you need to let your school’s financial aid office know that you accept the award.
Student Loan Success Tips
- Select your loans
- Access the application
- Select a loan servicer
- Choose a repayment plan
- Read the terms and conditions
- Submit
Federal Loan Forgiveness Programs for Healthcare Students
In some cases, you may be able to receive loan forgiveness, cancellation, or a discharge on your student loan. The Federal Government’s forgiveness programs are designed to meet a wide variety of financial needs, provided that students apply for these programs correctly and meet the eligibility requirements. There are even loan forgiveness programs specifically for healthcare professionals, so it’s important to research all your possible options before moving forward. Below we look at the different forgiveness programs available.
Biden-Harris Administration’s Student Debt Relief Plan
In 2022 President Biden, Vice President Harris, and the U.S. Department of Education announced a plan for loan forgiveness of up to $20,000 as part of their Student Debt Relief Plan. the U.S. Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education and up to $10,000 in debt cancellation to non-Pell Grant recipients.
Borrowers are eligible for this relief if their individual income is less than $125,000 or $250,000 for households.
As a result of orders that have been issued to block the plan, previous applications have been placed on a hold and new ones are not currently being accepted. Head to the US Department of Education page for updated information as it becomes available.
Repayment Plan Loan Forgiveness
Depending on the repayment plan you chose or were eligible for, there are forgiveness options that come standard with some of them.
REPAYE Plan:
Short for “revised pay as you earn,” REPAYE is a good option for students without graduate school debt. This is also beneficial for those who don’t qualify for other income-focused repayment plans. With this plan, you will usually pay 10% of your discretionary income toward the loan each month.
PAYE Plan:
This “pay as you earn” repayment plan typically requires borrowers to pay 10% of their discretionary income, but never more than the 10-year standard repayment plan amount. With this income-based plan, if your monthly payment doesn’t cover the loans interest, the federal government may pay the unpaid accrued interest on a subsidized Stafford loan for no more than three years. After 20 years of payments, the remaining loan balance is forgiven.
IBR Plan:
An abbreviation for “income-based repayment,” the IBR plan is one of the most popular repayment methods. The most significant benefit of this plan is that payments are calculated based on what you earn and not on what you owe. Additionally, the U.S. Department of Education may pay the interest your loan accrues for up to three consecutive years in some circumstances.
ICR Plan:
This “income-contingent repayment” plan may cost you more each month than other plans and caps at 20% of your discretionary income for 25 years. After that, your remaining loan balance is forgiven.
The Public Service Loan Forgiveness Program
Federal Perkins Loan Cancellation
Healthcare-Specific Loan Repayment Programs
National Health Service Corps Loan Repayment Program
National Health Service Corps Students to Service Loan Repayment Program
Faculty Loan Repayment Program
NURSE Corps Loan Repayment Program
Indian Health Services Educational Loan Repayment
National Institutes of Health Loan Repayment Programs
Health Professionals Loan Repayment Program
Military Loan Repayment Programs
Other Conditions for Loan Cancellation
Managing Your Student Loan
Managing your student loans as you juggle other life challenges upon graduation can be stressful. With some preparation and careful consideration of your options, however, you can take some savings and repayment strategies to simplify the repayment process while maintaining a solid credit score. Begin by exploring these repayment options below.
Repayment Options for Federal Student Loans
By exploring your repayment options, you can find a program that works best for your financial situation. Below are some common repayment plans accompanied by some quick notes that summarize the plan and which loans are compatible.
Standard Repayment Plan
Graduated Repayment Plan
Extended Repayment Plan
Revised Pay as Your Earn Repayment (REPAYE) Plan
Pay As You Earn Repayment (PAYE) Plan
Income-Based Repayment (IBR) Plan
Income-Contingent Repayment (ICR) Plan
Making Payments
Of course, one of the most important components to understand in the student loan repayment process is the act of making payments. As shown above, the amount and timing of your payments depend on which repayment program you choose.
Monthly payments
Grace Periods
Financial Counseling
Refinancing Your Student Loan
To refinance your student loan means to swap out your current student loan plan with a new loan that offers you a lower interest rate. This is a strategic move to help you get out of debt more quickly and simplify your monthly payments. If you are unsure whether or not you want to refinance, browsing new loan offers does not impact your credit score. Websites such as Student Loan Hero by Lending Tree offer student loan term comparison calculators and refinancing calculators to help you more easily compare your options.
Refinancing is not always a breeze, as you may need to meet some new specific requirements to be eligible. For example, many top lenders require you to be a legal resident with an undergraduate or graduate degree while also being creditworthy. Unlike a more flexible federal loan, such as direct consolidation loans, you are locked into a new financed loan with the same repayment plan until the debt is paid off.
How to Consolidate Your Student Loan
If you have multiple student loans serviced by more than one provider, it can be useful to consolidate federal student loans with a direct consolidation loan. Alternatively, you may be able to combine federal and private loans by refinancing. Consider these six steps below to consolidate.
- Select your loans
- Access the application
- Select a loan servicer
- Choose a repayment plan
- Read the terms and conditions
- Submit
Avoiding Default
Failure to pay back your student loan can result in a default on your loan. When you miss one payment, even by a day, your loan is considered to be delinquent. To avoid loan default, students must do everything in their power to make their loan payments on time. After 90 days of no payment, loans will be delinquent. If you think that you are headed toward student loan default, you might be able to take some steps to avoid it. Your options may change whether you have federal or private loans.
Delinquency, Deferment, & Forbearance
Delinquency
Deferment
Forbearance
Student Loan Q&A
There’s a lot of information for healthcare students and professionals to consider when it comes to loans. From repayment plans and refinancing to state-specific details and personal financial situations, it can be overwhelming at first. We offer this Q&A section below to help answer some of your initial questions with the hope that you can proceed with a little more clarity.
Getting Started
How and where can I find out how much I owe?
You can check your federal student loan balance by logging into your account at My Federal Student Aid. For private loans, you can contact your school to obtain a list or obtain a credit report from Equifax, Experian, or TransUnion.
How do I figure out if my loans are federal or private?
If your loan is not listed on the National Student Loan Data System, it’s likely a private loan. You will need to log into the site with an FSA ID.
Lowering My Payments
How can I lower my payments?
According to Edvisors, you may be able to lower your student loan payments by choosing a different repayment plan, consolidating multiple loans into a single loan, refinancing to get a lower interest rate, claim student loan interest deductions, or signing up for auto-debit.
What are income-driven repayment plans?
These are repayment plans that set your monthly student loan repayment. They are intended to be affordable and based on your income and family size.
How much would I pay on an income-driven plan?
The amount you would pay per month is typically calculated by percentage of your discretionary income. Percentages differ among plans.
I can’t afford to make payments. What can I do?
If you can’t make your payments, it may be best to first contact your loan servicer to discuss your options. Additionally, you could look into repayment plans, consolidating loans, deferment or forbearance, or look into loan forgiveness options.
Student Loan Forgiveness
Which forgiveness programs am I eligible for?
There are about a dozen federal student loan forgiveness programs. Consider this list from Student Loan Hero, which includes details on each program and eligibility requirements.
How long does it take to get forgiveness?
In many cases you can receive forgiveness after 10 years of on-time monthly payments.
Can I get forgiveness for private student loans?
Private loans are usually not eligible for any kind of forgiveness program. There may be some useful strategies out there if you fall behind on your private loan payments.
Where can I find more information on the Student Debt Relief Plan?
The Biden-Harris Administration announced a post-pandemic one-time Student Loan Forgiveness program starting in October of 2022. You can find more information about this program and if you qualify on the US Department of Education Website.
Lowering My Interest Rate
How can I lower the interest rates on my student loans?
According to TheCollegeInvestor.com, each program has different terms, Ranging from five years to 25 years.
Can I refinance my federal student loans?
You can refinance federal student loans but not through the federal government. You must use a private lender.
Dealing with Default
How do I get my student loans out of default?
According to ForgiveStudentDebt.org, you can get out of default if you consolidate your loan, rehabilitate your loan, cancel the loan, or pay it off.
How do I avoid wage garnishment?
One of the best ways to stop wage garnishment is to pay off your debt in one lump sum by borrowing money from friends or family. If that is not possible, you can try to negotiate with your creditor or challenge the garnishment in court if you feel it was wrongfully imposed on you. You may also be able to get a fresh start by filing for chapter 7 bankruptcy. In any case, you should receive professional advice from a trusted advisor or financial expert before making any decisions.
Student Loan Glossary
When navigating the student loan process, it certainly helps to understand some basic loan terms, many of which you’ll find scattered throughout loan materials and sprinkled into conversations with financial aid advisors. Use the glossary below to make sense of some basic loan terms.
Accrued interest
The amount of interest earned on a debt, such as a bond or loan.
Annual percentage rate (APR): Expressed as a percentage, APR is the annual rate charged for borrowing money. It is the yearly cost of funds for the term of a loan.
Co-signer
This is interest that goes unpaid and is added to your student loan, ultimately increasing the total amount you repay for a loan.
Deferment
Student loan deferment allows the pair to cease payments for up to three years.
Dependent student
Dependent students rely on their parents/parent for financial assistance and must report parental income on their FAFSA®.
Disbursement
The payout of funds from a lender to a school or borrower.
Guarantee fee
This guarantees the loan against a default and is often 1%. It is collected from each disbursement on a Federal loan to cover the cost of insuring the loan.
Interest
Interest is calculated based on a percentage of the loan and goes to the lender for the privilege of using their money for the loan.
Promissory note
This is a legal document that documents you were promised to repay federal student loans and any accrued interest and fees to the lender or loan holder.
Subsidized loan
This is a federal loan based on financial need and research for undergraduate students.
Capitalization
This is interest that goes unpaid and is added to your student loan, ultimately increasing the total amount you repay for a loan.
Default
A loan goes into default when the student fails to make payments as outlined in the loan contract.
Delinquent
Student loans are often considered delinquent when the borrower does not make payment by the scheduled due date. lenders typically report to the delinquency to credit bureaus when a loan payment is 30-270 days past due.
Forbearance
Under forbearance, student loan payments may be reduced or postponed for up to three years. Interest continues to accrue during that period.
Grace period
Depending on the lender, students may be able to receive a six-month grace period after graduating before they must start making payments on a loan. Grace periods may be extended for active duty personnel in the armed forces for up to three years.
Origination fee
This is the money a student pays to offset the lender’s cost for issuing the loan, usually around 1.062%.
Principal
This balance is the total amount of debt you owe.
Unsubsidized loan
Undergraduate or graduate students can qualify for an unsubsidized loan regardless of their income or financial need.
Student Loan Resources
Here are some useful resources from around the internet to help you locate the best loan and repayment options for you. Some of these sources focus specifically on healthcare students’ needs while others speak to all learners in higher education.
