Repaying Student Loans

Repaying Student Loans

Are you ready to test your knowledge about repaying student loans? This ten-question multiple-choice quiz will explore some fundamentals regarding types of student loans and repayment plans. After completing all ten questions, click "Grade Me!" at the end of the quiz to see how you did.

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What are the different types of student loans?
The three types of student loans are federal, private, and refinance. Federal student loan interest rates are set by Congress each year and require a high school diploma. Private student loans are offered through banks and other financial institutions and usually require proof of ability to repay the loan. Refinance loans are typically available after you graduate and after you have shown responsible payment history. With refinance loans, a private lender pays off your loans and gives you a new payment schedule with a lower interest rate.

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Who provides private student loans?
Banks, credit unions, and states are the primary source for private student loans. The lenders will want to see proof that you can repay it, which usually means a good credit score. A co-signer can also assist with qualification if needed, but that person becomes responsible for the loan if you can't pay it back. Private loans are available for specific circumstances, such as the bar exam and medical school. State loans typically change depending on the state, as each state has its loan programs.

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What is a graduated repayment plan?
A graduated repayment plan allows smaller payments at first, which increase every couple of years until the loan is paid fully within ten years. Eligible loans include direct subsidized and unsubsidized loans, subsidized and unsubsidized federal Stafford loans, all PLUS loans, and all consolidation loans.

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What is an extended repayment plan?
To become eligible for an extended repayment plan, you must have more than $30,000 in outstanding Direct Loans. Payments can be either fixed or graduated and require the loan to be paid in full within 25 years. Eligible loans include direct, subsidized, and unsubsidized loans; subsidized and unsubsidized federal Stafford loans; all PLUS loans; and all consolidation loans.

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What is an income contingent repayment plan?
An income-contingent repayment plan has payments that are recalculated yearly and are based on your updated income, family size, and the total amount of your direct loans. The required information must be updated annually even if there was no change. If you haven't repaid your loan in full after 25 years, then any outstanding balance will be forgiven. Eligible loans include direct subsidized and unsubsidized loans, direct PLUS loans, and direct consolidation loans.

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What is an income sensitive repayment plan?
An income-sensitive repayment plan has payments based on an annual income that will have your loan paid in full within 15 years. Eligible loans include subsidized and unsubsidized federal Stafford loans, FFEL PLUS loans, and FFEL consolidation loans.

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If you have multiple student loans, which one should be paid off first?
When looking to pay off multiple student loans, you should focus on the loan with the highest balance and interest rate since paying minimum payments will result in more interest over time.

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How many types of federal student loans are there?
There are four types of federal student loans available: direct subsidized and unsubsidized, direct PLUS loans, and direct consolidation loans.

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Which federal student loan is eligible for undergraduates who demonstrate financial need to help cover the costs of higher education?
Direct subsidized loans are for eligible undergraduate students who demonstrate financial need, to help cover higher education costs at a college or career school. Direct unsubsidized loans focus on students that do not base eligibility on financial need. Direct PLUS loans are for graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by financial aid. You will gain approval once a credit check is complete. Direct consolidation loans allow you to combine all eligible federal student loans into a single loan with a single loan servicer.

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For undergraduates, what is the maximum amount you can borrow per year in direct subsidized and direct unsubsidized loans?
Undergraduates can borrow a maximum amount of $12,500 per year in direct subsidized and unsubsidized loans.

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