Sometimes borrowing is necessary, but there is usually more than one option available for loans. Before borrowing from your retirement savings, you should determine that it's the best financial decision by considering the purpose, the cost and the future effect of the loan.
Yes, there is a loan fee on all Direct Subsidized Loans and Direct Unsubsidized Loans. The loan fee is a percentage of the loan amount and is proportionately deducted from each loan disbursement. The percentage varies depending on when the loan is first disbursed, as shown in the chart below.
It’s important to understand what types of loans you are offered. Generally, there are two types of student loans: Federal student loans: These loans are funded by the federal government. Private student loans: These loans are nonfederal loans, made by a lender such as a bank, credit union, state agency, or a school.
Many private student loans require payments while you are still in school. The interest rate is fixed and is often lower than private loans—and much lower than some credit card interest rates. View the current interest rates on federal student loans. Private student loans can have variable interest rates, some greater than 18%.
What types of federal student loans are available? The U.S. Department of Education has two federal student loan programs: The William D. Ford Federal Direct Loan (Direct Loan) Program is the largest federal student loan program. Under this program, the U.S. Department of Education is your lender.