Student loans are a hot topic in the news thanks to the court cases now surrounding President Joe Biden’s loan forgiveness plan. But, how do loans work and how do they affect the students who use them?

Jamie Pendergrass, senior assistant director of enrollment management and services, in a statement via email, explained the three kinds of federal loans offered: Federal Direct Subsidized Loans, Federal Direct Unsubsidized Loans and the Federal Direct PLUS Loan or Federal Direct Graduate PLUS Loan.

Pendergrass said subsidized and unsubsidized loans are offered to students based on their demonstrated financial need on their FAFSA. These are offered after taking into account any scholarships and grants the student received, and there are key differences between the two. A subsidized loan does not charge interest while students are enrolled in at least half of a full-time hour load or during the six months after a student is no longer enrolled in these hours. 

PLUS loans are not offered based on financial need. They can be used by parents of students or by graduate students to meet the cost of college attendance if they still have an outstanding balance, Pendergrass said. This type of loan requires a credit check and has a higher interest rate. 

There are also private loans available for students, though they typically have higher interest rates than federal loans and require a separate application process with a company. Katie Birdsong, a third-year studying psychology, decided to take out private loans starting in her first year due to not qualifying for enough financial aid.

“I had to get my dad to be the cosigner since I don’t have credit or anything and I probably wouldn’t have gotten approved,” Birdsong said. “We had to fill out a lot of documents for it, and there was a little bit of a wait process, and then you go through the disbursement to the college and all that … It’s a pretty drawn-out process, but it’s not terrible.”

In addition to college tuition, federal and private loans can also be used for food and rent while attending college. This is the case for Birdsong and for Josh Naddor, a graduate student in math and statistics education. 

“Luckily, I got an assistantship in March 2019, which retroactively covered my tuition, so that was helpful,” Naddor said. “Since then, I’ve had a graduate assistantship every semester I’ve been in school and my tuition is covered by the University. The majority of my loan money goes to paying rent.”

Birdsong said while loans have allowed her to attend college, she is also hesitant to attend graduate school because of those loans.

“I probably wouldn’t be here without them because I wouldn’t have been able to afford room and board and all that stuff that goes along with it,” Birdsong said. “There’s definitely a lot of drawbacks though, like just going into college and already being in debt is kind of a little crappy. It kind of holds me back from wanting to get my master’s and stuff because I’d love to get my master’s, but I don’t want to take out more loans.”

Naddor said he considers his loans to be an investment, with the hopes of getting a job to pay them and the additional interest bill off in the future.

“Things are not in my favor, no matter what,” Naddor said. “So do I suck it up and just be miserable for the next six years of graduate school while being a full-time grad student, or do I try to live somewhat comfortably? It’s not like I can go on vacation every day, but I’m not living paycheck to paycheck anymore because loans are helping me to live on my own, be able to eat actual food and stuff like that.”

Both Birdsong and Naddor said they recommend doing the research before applying for loans, especially when it comes to interest. 

“I kind of knew a good amount about [loans] just because my sister went through it,” Birdsong said. “I was like, ‘Okay, well, I’ll do that too.’ But it is just kind of sucky to know you’re gonna pay this back and a little extra.” 

Students should also fill out the FAFSA every year even if they think they do not have enough need, as loans can still be offered. Birdsong said she still received small federal grants and loans despite not qualifying for much financial aid.

Pendergrass said federal loan interest rates are currently at zero percent right now due to the repayment pause. However, Naddor said federal loan interest is still an issue to be considered.

“I think the fact that interest rates exist on government student loans is kind of asinine,” Naddor said. “They shouldn’t be profiting off of us trying to better our education.” 

For more information on student loans and financial aid, check out the Student Service Center’s website.