One of the recent innovations in secondary education is teaching classes in personal finance. Many high school students haven't learned how to manage their finances, which results in massive student loan debt when they graduate.

Managing Your Money

Everyone needs good money management skills. College students should know how to budget their finances before the student loan comes due. Here are some helpful suggestions. Using a debit card for everyday purchases means you're paying interest on items that may be frivolous. Developing self-control in your spending habits helps build a good credit history. You'll get a better interest rate when buying a home or a car.

Types Of Student Loans

Student loans are available from a variety of sources. Before taking out a loan, you should know the loan provider and terms. Students may get funding from the federal government, banks, or other financial institutions. The types of loans available to students include federal and private sources. Federal student and parent loans are available through government funding. Personal student loans are available through private sources, including banks, credit unions, schools, and state agencies. Here's what both types of student loans offer.

Direct Subsidized and Direct Unsubsidized Loans

The Department of Education offers loans to students of four-year colleges and universities, communities colleges, technical or trade schools. The difference is that Direct Subsidized Loans provide better terms to students with financial needs. The school determines the amount a student may borrow. The Department of Education pays the interest.

Graduate and undergraduate students qualify for Direct Unsubsidized Loans. Students don't have to prove financial need. The school determines the amount a student may borrow and bases it on the amount of financial aid. If a student chooses not to pay the interest during the deferment or grace period, the loan's principal adds the amount.

Federal student loan payments don't become due until after you graduate, you're no longer a student at your school, or you change your enrollment status to less than half-time. Federal Student Loans and Federal Parent Loans often have lower interest rates than private loans and many credit card rates. Unless you apply for a PLUS loan, a credit check isn't a requirement to qualify for a federal loan. Parents of dependant undergraduate students may apply for a PLUS loan for expenses not covered under financial aid. Under Direct Subsidized and Direct Unsubsidized Loan programs, students may borrow between $5,500 and $12,500 per year, depending on the year you're in and status as a dependant.

Private Student Loans

Private loans made by banks, credit unions, and state-affiliated or state-based organizations have different terms. Depending on the school you attend, loan payments could be a requirement before you graduate. However, many schools allow deferral of the loan payments until after graduation. Fixed interest rates on these loans may be lower or higher than federal loans, depending on the student's circumstances.

Private student loans may not be subsidized, and the student must pay the interest. Some personal loans require an established credit history and may need a parent to be a co-signer. Students may not consolidate a private loan into a Direct Consolidation Loan. However, these loans may qualify for refinancing. Some personal student loans may be eligible for lowering the interest rates or postponement options. Before pursuing these options, students should make sure there aren't prepayment penalties associated with the loan.

Best Loan Options For Students

Many financial; experts recommend Federal Student Loans for undergraduate students. The loans are issued to students by the federal government and have lower interest rates than private sources. Students may get approval for a federally funded loan without a co-signor. Government loans are easier to get approval for and they provide safety nets for repayment. One of the primary differences between federal and private loans is that the federal government can place limits on the amount a student may borrow. Undergraduates may borrow a total of $12,500 each year up to $57,000 total. Graduate students may borrow up to $20,500 a year up to $138,500 total. It's essential to research loans, find the right lender and get the best terms.