Student Debt And College Loans, Explained

How to strategically manage your debt and balance student loan repayment with other financial priorities.

College student with laptop and calculator
(Image credit: Ameriprise)

Whether you’re borrowing funds yourself or considering how much your student should borrow for college, understanding student loans and student debt is a critical part of planning for education today.

Here are answers to common questions about student borrowing and college loans — and how they may fit in with your long-term financial goals. An Ameriprise financial advisor will help you develop a strategy for loans as part of your education goals while taking into consideration your full financial picture and long-term goals.

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What are the advantages and disadvantages of the different kinds of loans?
Header Cell - Column 0 Federal loan Private loanInstitutional loan
AdvantagesTerms and conditions are set by lawHigher borrowing limitsPotentially more competitive interest rates and deferment provisions than both federal and private loans
Row 1 - Cell 0 Fixed interest rates and income-driven repayment plans, typically not offered by private lendersAbility to help a student build their credit scoreRow 1 - Cell 3
DisadvantagesLower borrowing limitsInterest rates are often higherSchool borrowing limits, eligibility requirements and repayment conditions apply
Row 3 - Cell 0 Row 3 - Cell 1 May require a cosigner unless the student has established creditRow 3 - Cell 3
Row 4 - Cell 0 Row 4 - Cell 1 Aren’t eligible for income-driven repayment plans or federal loan forgiveness programsRow 4 - Cell 3
Row 5 - Cell 0 Row 5 - Cell 1 May not have deferment or forbearance provisionsRow 5 - Cell 3
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Direct subsidized loansDirect unsubsidized loans
Available only to undergraduate students enrolled at least half time at a school that participates in the Federal Direct Loan Program.Available to undergraduate or graduate students enrolled at least half time at a school that participates in the Federal Direct Loan Program.
Only available to students with demonstrated financial need.Available to students regardless of income or financial need.
The loan amount is determined by the school, and it may not exceed the student’s financial need.The loan amount is determined by the school based on the cost of attendance and other financial aid received.
Interest on the loan does not accrue until six months after the student leaves school.Interest begins to accrue once the loan is dispersed.

This information is being provided only as a general source of information and is not a solicitation to buy or sell any securities, accounts or strategies mentioned.  The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as a recommendation or advice designed to meet the particular needs of an individual investor.  Please seek the advice of a financial advisor regarding your particular financial situation.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

Ameriprise Financial cannot guarantee future financial results.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial Services, LLC. Member FINRA and SIPC.

© 2023 Ameriprise Financial, Inc. All rights reserved.

This content was provided by Ameriprise. Kiplinger is not affiliated with and does not endorse the company or products mentioned above.

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