Should I Make Payments towards Student Loans while in College?
By Victor Giordano & JW Rayhons
There has been a great increase in the demand for higher education. Even though there are many grants, scholarships and financial aid available, some people may still need to take on student loans. There are different types of student loans and how to repay them, but we will divide into two categories: Government provided loans and Private loans.
Subsidized Vs Unsubsidized Loans
In government provided loans there are two distinctive types, subsidized and unsubsidized. Subsidized loans start accumulating interest only when you finish school or stop studying, unsubsidized start accumulating interest when you take on the loan. Those are important features to decide when to start making payments towards it.
In private student loans, there may be many differences within the options. But usually, they are offered at a higher rate than government sponsored loans, and they start accumulating interest from when the loan is taken.
How Make Payments Towards Your Loans
There are two ways to approach the idea of making payments towards your loans. For unsubsidized and private loans, because interest starts accumulating as soon as you take the loan it is important to start making payments towards it as soon as you are able to, during or after school. However, for subsidized loans you have different alternatives. Because the loan starts to accumulate interest only after you stop studying, you can separate the amount of money you would be using to make payments and put it towards an investment account while you are still studying. That way the money you separate can generate some interest, so when you do stop studying you are able to pay for a larger amount than you otherwise would. An important point to consider is that investment accounts involve risk, and you should use them accordingly to your risk tolerance. To understand your risk tolerance and options of investment accounts we, at Rayhons Financial, are happy to assist and guide you through it.
Student loans can be a difficult barrier when moving towards financial freedom, but we would gladly assist you on overcoming this and other barriers.
In order to better analyze and help individuals, Rayhons Financial Solutions counts on a great team of knowledgeable and experienced professionals with strengths in different areas. This allows us to create great ideas and alternatives to meet the best interest of the individual. Call us at (480) 507-2425 or contact us online. We’d love to meet you.
Victor Giordano is a GCU Intern with Rayhons Financial Solutions. Victor cannot offer securities or advisory services.
The content in this article was prepared by the article’s author. Voya Financial Advisors, Inc. does not endorse its content, and the views expressed may not necessarily reflect those held by Voya Financial Advisors, Inc.