Financial Literacy Program

Student loans are loans for education from the federal government or private lenders. There are multiple types of federal loans, and most have more favorable terms for borrowers than private loans.

i. For instance, most federal loans have fixed interest rates — some private loans have rates that may increase —, allow one to delay payment until after graduation, and offer flexible repayment plans.

ii. Some federal loans are “subsidized.” A subsidized loan results in a lower total interest payment for the borrower over time because the government pays the interest on the loan while the borrower is in school.

iii. Visit this U.S. government website for more details on the differences between private and various federal loans.

Lenders often repossess collateral if a borrower defaults; a bank will take back a house if the borrower fails to make the monthly mortgage payment. The federal government or a bank cannot repossess your experience in a classroom. This results in certain unique consequences should one default.

It depends on how long you’re unable to pay.

Note that if you have direct subsidized or unsubsidized loans, then you can defer payments out of graduation for six months.

But let’s assume you’ve defaulted on a federal student loan. The consequences can be significant. For instance, you may lose eligibility for future federal benefits, have a worse credit score, or have your wages garnished. Although a private actor cannot garnish your wages, other similar effects may occur depending on the loan servicer.

Note that politicians may extend student loan repayment or forgive debt, although this is impossible to predict with regularity and should not be used as reason to take out or not take out loans.

To obtain a federal student loan, you must complete the Free Application for Federal Student Aid (“FAFSA”).

Assuming you are a dependent of your parents, this form requires your and your parents’ social security number, federal income tax returns and records on money earned, bank statements and investments, and an FSA ID. If you are not a U.S. citizen, you must post your alien registration number as well. Prepare this information before beginning the form to make the process smooth.

After completing this form, you will have to sign a “master promissory note” — a document in which you accept the terms and conditions of the loan.

We cannot answer this for you. It will depend on your financial situation and innumerable factors like whether your parents support you, whether you are able to secure a job that can pay the debt, and the overall state of the economy.

We encourage you to use the given resources as a jumping off point for learning more. We also point you to this site to calculate your student loan payments to see whether you could make them

A budget is a plan for one’s income and expenses over a period. Keeping a budget will benefit you by ensuring that you have enough money to do the things that you want and by letting you save for long-term purchases and/or investments. You’ll probably be unable to buy a down payment on a house, for instance, if you never save more than $5 a month.

If possible, record your income and expenses over a previous period.

Also, set financial goals:

a. If step 1 is impossible but you’ve secured a job and housing, then:

i. Input your future salary over a period — let’s say 1 month — and project future expenses over that period. Leave no stone unturned. What will you spend on eating out? On clothes? On subscription services?

ii. After that month, see whether your forecasts aligned with reality. Did you spend more or less than you earned? Did you spend more or less than you thought you did in certain areas?

iii. Then adjust your future spending to align with what you want. Having 25 different movie and show subscription services may be nice, but the extra variety may also be useless to you.

iv. Continue this process into the future.

Money today is worth more than money in the future. Mathematically..

What do the terms here mean? PV is “present value” — the value of a payment today —. FV is “future value” — the nominal amount that some money is worth in the future —. R is the “discount rate” — the rate that one could obtain by placing money in an investment elsewhere. T is the number of periods in the future.

1. Let’s say you can get a $100 payment in 1 year. Also, the interest rate on a risk-free asset — such a thing doesn’t really exist, but most finance professionals take U.S. treasury bonds as “risk-free” — is 10%. The present value of that $100 payment is..

Inflation — an increase in prices — disrupts our equation. We need to find the “real rate” — the growth in our purchasing power — if there is inflation. How?

Let’s assume the inflation rate in our above example is 5%. What’s the real present value of the $100 payment in one year?

Saving is often the easiest path for people to accumulate wealth to achieve their financial goals.

You should maintain a budget that ends with you spending less than you earn in most months.

You should have objectives and target your budget to meet them.