Student Loan 101 – Inside INdiana Business

There’s been a lot of discussion about college costs, student loans, and student loan forgiveness, and for good reason. According to eLearningWorld, college costs have increased 4.6 times his rate of inflation over the past 50 years. So it’s no surprise that about 70% of families sending their children to college apply for loans. As of July 2022, about 48 million American borrowers owe about $1.75 trillion in student loan debt ( That’s a lot of money.


When deciding how to pay for a college education, you first need to know how much a degree will cost. Then, when you have that final number, look at 529 plans, other investments, grants, scholarships, education tax credits, and personal cash flow.

If all this adds up to a net negative, you’ll need to figure out a way to make up for the shortfall, and the answer might be student loans.

loan type

You’ve probably heard of federal student loans, private student loans, PLUS loans, subsidized and unsubsidized loans. Which one is right for you?

In most cases, borrowers must first apply for federal student loans. This is because they can offer repayment and forgiveness plans that private lenders typically do not offer. To apply for a federal loan, you must complete the FAFSA form (Free Application for Federal Student Aid). I encourage you to read the article published September 26, 2022 written by my colleague Abby VanDerHeyden on the process and importance of completing FAFSA.

federal direct loans

  • Subsidized Federal Direct Loans are need-based loans available to undergraduates who attend school at least half the time. The school determines how much you can borrow, and the federal government pays interest on the loan until you graduate.
  • Unsubsidized Federal Direct Loans are not need-based and can be used for undergraduate and graduate education expenses. The school will continue to determine how much money can be borrowed, and interest will accrue while the student is in school. Interest can be paid as it is accrued or added to the loan balance.

Federal Direct PLUS Loan (Parent Loan for Undergraduate Students)

  • These loans allow parents to borrow money for their children’s education. This loan is not need-based and eligible borrowers can borrow the full amount needed for a student’s education. Fixed monthly payments are amortized over several years and can be deferred until the student graduates. However, the interest on the loan will continue to accrue during this time. It is important to note that PLUS loans are not transferable to children.

private student loans

  • These loans are available through financial institutions and are usually based on the creditworthiness of the co-guarantor. It is private student loans that are often less flexible and harder to restructure. Also note that direct federal loans are forgiven if a student dies, but private loans are co-signer obligations.

pay back debt

Student loan debt is financially inconvenient for many and it is important to make sure you can afford to repay the loans. As a general rule, student loan debt should not exceed your estimated starting salary. not.

If you find yourself in financial difficulty repaying your loan, contact your loan service provider to set up a new repayment plan. If you have federal loans, determine if you qualify for a waiver under the Public Service Loan Forgiveness Program or if you qualify for a deferment or waiver.

Ignoring and not paying student loans can lead to late fees, damaged credit scores, and wage garnishments.


Considering that the average cost of going to college has increased by 2700%, About 4.6 times the inflation rate of the last 50 yearsHowever, it is not surprising that more and more people are applying for student loans to pay for their education. Build your foundation.

Meredith Carbrey (CFP) is a Senior Wealth Advisor at Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit her website at: Or email Meredith

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