Ultimate Guide to Student Loans

Everything you need to know about student loans.

A college education pays for itself, according to the U.S. Bureau of Labor Statistics (BLS). In fact, while a high school graduate averages approximately $638 a week in earnings, an undergrad averages around $1,053 and someone with a graduate degree rakes in $1,263 per week.

Moreover, 83% of college students and parents strongly agree that higher education is an investment in the future and the path to earning more money (69%), according to a national survey by Sallie Mae and Gallup, “How America Pays for College 2012.”

But how to pay for college? While, there are several options including…

  • 529 savings plan
  • Educational grant
  • Home equity loan
  • Savings account
  • Scholarship
  • Student aid
  • Student loans
  • Work study program

…35% percent of students who participated in the Sallie Mae survey said they received student loans. Of those, 25% borrowed federal loans only, 9% used a mix of federal and private loans, and 1% tapped private loans only.

Scholarships are a valuable resource for financing college expenses. About a third of college costs are covered by scholarships and grants. If you are going to college and you want to use your education to help people reach their financial goals, check out SuperMoney’s Financial Literacy scholarship program. It awards $2,500 a year to a student who wants to help Americans improve their financial wellness through continued education.

Student Loans to Help Pay for College 

If you’re looking for the right loan to help you pay for your own or your child’s college education, there are a number of options.

  • Direct Loans. This program, backed by the federal government, offers three types of loans:
    • Stafford loans. Available in two forms – subsidized and unsubsidized – these are the most common federal student loan available.
    • PLUS loans. Parents (Parent PLUS) and Graduate students (Grad PLUS) are eligible for these loans intended to cover expenses not met by other federal financial aid.
    • Consolidation loans. Allows you to combine multiple federal student loans into one loan. The result is a single monthly payment.
  • Perkins loans. Designed for students with exceptional financial need, they are low-interest federal loans, administered by the school.
  • Institutional loans. Often the school you attend will offer non-federal aid to their students. Check with the financial aid department at your university or college to find out more information on whether they offer this type of loan.
  • State loans. Many state governments and higher education agencies work with student loan providers to provide specially designed private student loans to residents of the state.
  • Private loans. If you have nowhere else to turn, you might want to consider taking out a loan with your local lending institution.

To receive a federally funded student loan, you will need to apply through the Direct Loan program offered through the U.S. Department of Education. Federal law sets the interest rates and fees.

The benefit of federally funded loans is that they generally offer lower interest rates and more flexible repayment plans than your average bank loan. Additionally, you can deduct up to $2,500 in student loan interest on your tax return regardless of whether you itemize deductions.

Dealing with Student Loan Debt after Graduation

Once you’ve completed your education, there is still the need to repay your loan(s). For many graduates, this can be difficult. There is help available.

If you have a federally backed loan, you may be eligible for forgiveness, cancellation, or discharge of the loan under certain circumstances such as disability and bankruptcy or if you enter teaching, volunteer service, or public service.

Type of Action

Direct Loans

Perkins Loans

Total and Permanent Disability Discharge



Death Discharge



Discharge in Bankruptcy



Closed School Discharge


False Certification of Student Eligibility or Unauthorized Payment Discharge


Unpaid Refund Discharge


Teacher Forgiveness


Teacher Cancellation


Public Service Loan Forgiveness


Perkins Loan Cancellation and Discharge*


*Service must be in the Peace Corps or VISTA, military, as a nurse or medical tech, a law enforcement or corrections officer, head start worker, child or family services worker, or intervention professional.

Additionally, deferment and forbearance offer a way for you to temporarily postpone or lower your loan payments while you’re back in school, in the military, experiencing financial hardship, or in certain other situations.

If you think you qualify for forgiveness, cancellation, discharge, deferment, or forbearance, contact your loan servicer.