How Student Loans Work…EXPLAINED!

How Student Loans Work…EXPLAINED!

November 19, 2019 22 By Stanley Isaacs


Mike: Hey? Have you guys ever heard of Tyler
Oakley? Well, Tyler Oakley has heard os student loans, cuz he had ’em. Big time. And so he
and his friends at Big Frame have asked us to make this for you to explain how student
loans work so you know, you guys can hae a slightly better life vis a vis (?) student
loans than Tyler did. Cuz from what I understand, he and his friends found it very confusing
being that they’re humans and everything. So how do student loans work, and how can
you make them work better for you? Part One: The FAFSA AKA Free Application for Federal Student Aid.
Now before you actually start looking for loans, you’re gonna want to fill one of these
babies out, either online or on a paper form, which apparently is still a thing. Did you?
I didn’t. In any case, huh? Quick note: filling out the FAFSA is FREE!
Free! Never pay any scammers who are trying to get your money to fill it out. Go to FAFSA’s
government website, not FAFSA.com because those guys… somethin’s fishy. In addition to being used for federal financial
aid the FAFSA is also used by state and school funded programs, such as scholarships. Now
if you’re in high school, reeer-eer rock and roll, high school here, it’s the hippest
place in town. Look at me, I’m not a 31 year old man, I’m so hip. I think you can tell.
(beep) If you’re in high school then you’ll definitely want to fill this out as soon as
possible after January 1st during your senior year. If you’re not in high school, you
still do want to fill it out as soon as possible after the New Year. I do want to take a second to emphasize how
important this is. Most financial aid is given out on a first come, first served basis even
though it is determined by different factors. So the sooner you can get that FAFSA in, the
bettter you chances of getting the maximum amount of aid available to you. And alas,
this is not a one time thing, either. Even when you’re in school, you have to keep filling
it out every year. This is because, you know, your circumstances might change. One of our
lovely Tumblr readers said that you can get help from the financial aid office which makes
a lot of sense and we would highly recommend that. To actually fill it out your FAFSA, you’re
gonna need some documents. There are lots of different ones, so right now that information
is just floatin’ around my face right now because powers. Also, don’t leave any blank
space on the form, if something doesn’t apply to you, just write zero or not applicable
and then you’re done, you know. Just wrap that baby in a blanket and smack it on the
bottom, cuz we’re going on to– Part Two: Types of Loans After submitting your FAFSA, there are going
to be a number of different loan options. These include: 1. Stafford Loans – These are offered directly
to you, the student, from the US Department of Education. They can be used to pay for
many different kinds of higher education. Stafford loans will either be subsidized or
unsubsidized, based on your financial need. Subsidized loans mean you don’t have to
pay any interest on the loan while you’re still in school at least half-time. If your
loan is unsubsidized, you begin accruing interest on the first day you receive your funding. 2. PLUS Loans – AKA “Parent Loans for
Undergraduate Students.” These loans are offered to the parents of students by the
US Department of Education to help fund their child’s education. PLUS loans are limited
to the actual education expenses minus any other financial aid received by the student. 3. Perkins Loans – Perkins loans are available
for undergraduate or graduate students. These loans are financed by your school, but are
guaranteed by the federal government. Perkins loans are based on your financial need and
have caps of $27,500 for undergrads, and $60,000 for graduate students. When weighing your financial options, PLEASE
be sure to look at your interest rate. Even decimal points of difference can add up to
huge amounts over the 10, 20 or whatever years during which you’re going to be paying your
loans. So read that fine print baby! Depending on your situation, you may also
need to apply for private loans. These are kind of tricky. Private loans typically charge
higher fees and more interest, but we do know that they might be the only option in your
case. More info in the dooblydo. Part Three: Repayment Hey, check out that fancy piece o’ paper
in your hands! Whoah mama! Aooga! Time to pay for it. You’re gonna have a few different
choices of how to pay your loans back. 1. Original terms – You can repay based on
your loan’s original terms. This is typically a 10 to 20 year repayment plan and it is the
most common method. 2. Income-based repayment. This is the second
most common type. The terms of your original loan are restructured to fit into your budget
based on your current level of income. You will need to reapply ever year for this type
of repayment, because your income may be changing year to year, hopefully going up. Up, up,
up, to the moon! 3. Deferment – If you can’t afford your student
loan payment, in some cases you can defer it. Deferment doesn’t get rid of your student
loan debt, it simply puts off when your repayment plan begins. It’s usually only granted to
current students, citizens in the military, or if you’re unemployed or are earning less
than the minimum wage. Unsubsidized loans will continue to accrue interest during deferment,
so it’s a good idea to make any payments that you’re able to. 4. Consolidation Loans – If you’re now
out of school and find your current repayment plan difficult to manage, you can always consolidate
your loans. Consolidating will take multiple loans and simplify them into a single new
loan. This can make repayment simpler and can extend your repayment terms up to 30 years,
which will lower your monthly payments, but will greatly increase the amount of interest
you pay over the years. It is super dupes important to stay on top
of your student loan payments or to work with a loan servicing company if you know that
you can’t make your payments, do that as soon as possible. Also, student loan debt does
not automatically go away. Even if you file for bakruptcy! What the crap? Only under very
special circumstances are you going to have these loans forgiven. One of those circumstances
is death. So you die, but you don’t have to pay. Every cloud… You may actually be able to get your loans
reduced or completely forgiven if you choose to work in the public sector. You may still
have to may 120 on-time monthly payments before your remaining balance is forgiven, but this
is a great option for local, state, and federal government employees. Part Four: A Note for Parents Hi parents! It’s nice to see you around here.
You’re looking nice. Would you like this gift card for Chili’s? (laughs) Or these tickets
to your Billy Joel concert? Or would you like… what’s another thing grown-ups like? I’m a
grown up (record scratch) Existential crisis! According to Forbes, more than half of all
student loans are either delinquent or in deferral. These loans can be for staggering
amounts, so if you do choose to help pay for your child’s college education, saving early
is A+++. The IRS actually wants you to help pay for your child’s education, so they have
something called a 529 Savings Plan, which is kind of like a Roth IRA for saving for
your bebes’ future. Not everyone has parents who are going to be able to help, but I do
want everyone to know this option exists to help. Part five: Tyler Oakley I’m so excited about this that I spit. I spit
in the rainbow arc, with the bad french accent that goes to italian sometimes. Tyler, you
make me speak in tongues, you make my sould dance, you make my liver quiver. I don’t know
what to say to you except (kiss) Thank you so much to Tyler Oakley and friends
for suggesting the topic of this week’s video. In return, I’m so happy to tell everyone that
HowToAdult will be donating ad revenue from this video to the Trevor Project. The Trevor
Project is a 24-hour hotline and resource for crisis intervention and suicide prevention
services to LGBTQ young people from ages 13-24. Tyler has supported the Trevor Project for
years. It’s very near and dear to his heart and to ours, so this is just our way of paying
it forward. Thank you so much Tyler, we heart you. If you guys are looking for a model of
awesome adulthood, Tyler Oakley is pretty hard to beat. We’ll see you guys next week.
I love you bye. (kiss) (endscreen)