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Best Practices: Understanding Student Loans from a Business Perspective

Published on September 15th, 2017

Photo: Student sitting on a wallStudent loan debt is a major part of the financial landscape and is a topic debt loan consolidators need to be well versed in. One of the things you need to understand up front is that student loans are far more prevalent than they were in the past. Likewise, tuition for both undergraduate and graduate programs has ballooned. So more students are taking out loans, and they’re for ever-increasing amounts of money.

Student Loan Hero is a great source of data on student loans. Right now, total student loan debt in the United States is approaching $1.5 trillion. That amount is spread out among more than 44 million Americans. For students who graduated in May of 2016, the average student loan debt was $37,172, with average payments at $351 per month. In 2010, student loan debt leapt past credit card debt to become the second largest form of household debt after mortgages. Even more startling? As recently as 2008, student loan debt was the smallest form of household debt.

Needless to say, the explosion in student loan debt has changed the field of debt consolidation. Rather than a relatively small piece of a larger financial whole, student loan debts are often the primary reason younger clients first reach out to a debt loan consolidator. In the past, debt consolidation firms may have been contacted by clients with a mortgage, car payments, and credit card debt, having had each for several years. Today, clients often reach out shortly after signing the paperwork for their first mortgage or car loan, as these new responsibilities, coupled with their student loans, have necessitated debt consolidation far earlier in life.

For these clients, it’s not just about getting the dollar amount owed each month down, it’s about making their debt management simpler. Student loan debt is often spread out across multiple providers, comprised of different interest structures and payment plans. These clients are confronted by a slew of different online logins, interest rates, and rules and regulations from the moment they begin to pay back their student loans. Once they add in other loans to the picture, it can be a confusing mess. That’s where your debt loan consolidation services come in.

Here at DebtPro, we’ve put together a quick guide to introduce you to some of the different types of student loans.

Federal Loans

There are two broad categories of loans: federal and private. Federal loans are given out by the government, and take a few different forms. Federal Stafford Loans are paid directly to the student. These loans are awarded by financial need, with students learning the amount available to them after filling out the FAFSA—the Free Application for Federal Student Aid. Subsidized Federal Stafford Loans do not accrue interest while the student is in school. Unsubsidized Federal Stafford Loans still require students to fill out the FAFSA, but they are available to all students, regardless of financial need. These loans do accrue interest while the student is in school.

Perkins Loans are another type of federal student loan for students in need. These loans are given out to the school for qualifying students, with students issuing their repayments to the school. Again, students must fill out the FAFSA to qualify for a Perkins Loan.

There are also PLUS loans—Parent Loans for Undergraduate Students. These were created for parents looking to help fund their children’s education.

Private Loans

Most students do everything they can to remain within the bounds of the federal loans described above. Federal student loans have terms and conditions designed to address the risks and challenges of repayment for recent graduates. Private loans lack these safeguards, which makes them far less attractive. These are typically loans of last resort for prospective students.

Looking for an efficient way to manage your student loan clients? Check out DebtPayPro’s student loan software.

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