Understanding Student Loans

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Understanding Student Loans for Undergrads

Beginning your undergraduate journey is an exciting time, but figuring out how to finance the expense of higher education can be overwhelming. This year is especially rough with the delayed award letters from colleges and universities, causing uncertainty for families and students as they wait for financial aid and grant money. Once the aid packages are received, many families will seek out student loans, which are an important component of the financial planning process. This guide aims to explain student loans, covering the essentials of federal and private loans, qualifications and repayment options.

Grants, Federal and Private Student Loans

The first step in securing the funding you need for higher education is exploring grants or scholarships that are available to the student. There are many regional and local scholarship opportunities that are tailored to the student’s educational pursuits and applying for these before exploring loans will reduce the total amount that will need to be financed.

The next step involves creating a FAFSA (Free Application for Federal Student Aid) account which gives you access to federal funding for college expenses. Federal loans, known for their lower interest rates and flexible repayment options, should be your first choice for education financing. These loans offer a variety of benefits, including deferment options and income-driven repayment plans and can be used for many educational expenses.

Private student loans, provided by financial institutions like KEMBA Financial Credit Union, serve to fill the gap left by federal loans, grants and scholarships. While often covering a broad range of expenses, they may come with higher interest rates and may require a credit check or co-signer, but these loans are an important part of the financing puzzle.

Expenses That Student Loans Cover

Understanding what student loans cover is crucial for effective budgeting. Both federal and private loans can be used for:

  • Tuition and fees, ensuring you can pay for your classes and associated costs.
  • Room and board, whether you live on-campus or off-campus.
  • Books and supplies, which can add up quickly each semester.
  • Personal and living expenses, to a certain extent, ensuring you can focus on your studies without financial stress.

Impact of Interest Rates

Interest rates significantly affect the total cost of student loan borrowing. They can be either fixed, offering stability over the loan's life, or variable, which may change over time based on market conditions. Understanding how interest accrues on your loan is also important, as it can increase the total amount you will need to repay. Some loans start accruing interest as soon as the funds are dispersed to your school, while others have a deferment, which means you aren’t charged interest until your repayment begins.

How Credit Scores Factor In

For undergraduates, a lack of credit history can be a hurdle in securing private student loans. However, adding a co-signer with a strong credit history can help you qualify for loans with better terms. Some loans offer a co-signer release option where the student takes on full responsibility for the loan. KEMBA provides resources like our Credit Assessment Tool to help students and families understand their credit positions.

Family Involvement

Parents, grandparents, or guardians often play a significant role in financing a child's education. This can include taking out Parent PLUS Loans or using savings. Each option has its pros and cons, and it's important to consider the long-term implications on the family's financial health. Planning tools like an Ohio 529 college savings plans offer a tax-advantaged way to save for future educational expenses, but these plans are most effective when you plan and save early for college expenses.


Understanding your repayment options is also important, including early pre-payment penalties that may apply. Federal student loans offer a range of repayment plans to fit different financial situations, while private student loans vary and may have less flexibility. Strategies for early payoff can save money on interest, and effective budgeting is key to managing student loan payments. To estimate your repayment and consolidation options, use KEMBA’s Student Loan Calculator.

Impact of Delayed Award Letters

Anxiety is likely higher than usual waiting to hear back from students’ top choices for their undergraduate education this year. Most families will not know the full financial picture of the college options until May, making it difficult to secure additional funding – beyond financial aid, government loans and grants. However, some private student loan options can be secured now without the details from colleges and universities for peace of mind as the last-minute information arrives.

KEMBA Provides Student Loans

As you navigate the complexities of financing your education, know that KEMBA’s private student loans are here when you need them. KEMBA offers Undergrad Student Loans with competitive rates and terms, designed to complement federal student loans and scholarships; plus – as a line of credit that you draw on when you need the funds – it provides an opportunity for students and families to secure a loan without knowing the exact amount they’ll need come fall. We also offer Graduate Student Loans for students pursuing a degree after completing their undergrad and offer refinancing options to consolidate your college debt as well.

For more information and to learn more about how KEMBA can assist with your student loans, visit our Student Loan page. If you're looking for one-on-one support, visit a local KEMBA branch today. Our team of dedicated associates are here to help you achieve your educational goals while optimizing your family’s financial health. Contact our dedicated member service team at 614.235.2395 and select Option 4.


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