checks are generally required and in many cases a student will need a co-signer, which is someone more financially stable that agrees to serve as a backup person to repay the loan. On the positive side, pri- vate loans are more likely to finance a greater percentage of student’s college debt, sometimes as much as 100 percent. Most college loans require students to begin paying them back approximately six months after graduation, or when the stu- dent stops attending school full-time. Fed- eral loans offer much broader repayment options. Most federal loans are spread out over ten years, however they also provide extended payment plans. Knowing a stu- dent might start a new job that pays less in the beginning but will continue to earn more as time goes by, one option available is an income-driven repayment plan that starts with smaller monthly payments and increases over time, hopefully coinciding with a student’s income. These plans can spread the loan out to as much as twenty- five years, making the monthly payments much lower. While having a smaller monthly payment is great news on the front end, one must also remember that interest is accruing over that extended pe- riod of time, significantly raising the total amount they pay back. For example, if a student borrows $35,000 total during their college years, they will have a monthly payment of approxi- mately $397 (based on an interest rate of 6.5%) for ten years and will eventually pay $47,690 including interest. That means a student will pay a total of $12,690 over those ten years in interest over and beyond the original $35,000 they borrowed. However, if a student opts for an income- driven payment plan spread out over ap- proximately twenty-five years, they will have a much lower monthly payment of only $236 but will end up paying about $71,000 total during the lifespan of the loan. That means they will end up paying over $36,000 in interest charges in addi- tion to the original $35,000 loan amount. In essence, a student is provided an option to pay less each month once they graduate, but end up paying a much greater amount in interest over twenty-five years— or pay more each month after graduation and ul- timately pay much less in total after ten years. There is no right or wrong answer and each student must make their deci- sions based on their own circumstances and abilities to pay. There are a host of other repayment plans available for federal loans including grad- uated, extended and even ones that are based on a percentage of total income, as- suring the monthly payment does not ex- ceed funds needed for housing, food, transportation, etc. To learn more about the various loan repayment options, visit studentaid.gov/manage-loans/repay- ment/plans. Private loans usually do not offer these same repayment options and are pretty straightforward with the interest rates, length of loan and monthly payments. However, some institutions do offer some flexible repayment plans. A private lender will share all options available at the time a student begins the loan application process. Lastly, federal loans also offer options for unique circumstances which they call for- bearance, which basically means tem- porarily not requiring one to make payments. For example, the federal gov- ernment froze all student loan payments during the COVID years, knowing most Americans were suffering financially. Pay- ments and interest were both placed on pause during those years providing individ- uals with much-needed relief during diffi- cult times. Forbearances can also be provided for a short period of time should a person have other financial difficulties. Loan providers will consider these requests on a case-by-case basis. What is Subsidized and Unsubsidized Loans? Students might see two words on their fi- nancial aid forms: subsidized and unsub- sidized. This has to do with when the interest begins being charged. Subsidized loans only begin charging interest after the six-month graduation period while unsub- Understanding the Basics About Student Loans 8 2026 | Tennessee College Guide
