NEW YORK (AP) — If you’re heading to college or starting to think about where you’d like to apply, you’re probably considering options for funding your education. If you need to borrow money to pursue your dreams, you are far from alone.

According to the Federal Reserve, 30% of all U.S. adults said they incurred at least some debt for their education. Borrowers owe a collective $1.77 trillion in student loan debt, including federal and private loans.

“Borrowing is almost at the point where it’s a requirement,” said Dana Kelly, from the National Association of Student Financial Aid Administrators.

If you’re a high school senior or a college student, you’ll want to apply for federal student loans through the Free Application for Federal Student Aid, also known as FAFSA, in December for the 2024-2025 school year. For private student loans, you can apply whenever you need the loan.

When you take out student loans, it’s beneficial have to have an idea of what professional field you want to pursue, calculate how much you need to borrow, and understand the basics of loan interest. If this sound like a lot, don’t worry — we’ll break it down for you. Here’s what you need to know.

WHERE DO I START?

The first step is to fill out the FAFSA. You will have to answer questions about your family’s financial contribution, along with other questions that will help determine if you qualify for federal or state financial aid and which loans you can apply for. You’ll fill out the application each year.

Cathy Mueller, executive director of Mapping Your Future, a non-profit that helps people navigate higher education, recommends exhausting every possible funding option to reduce the amount you need to borrow.

If you’re looking to apply for scholarships to fund your college education, you can check out the College Board’s scholarship search directory.

As you fill out the FAFSA, Mueller recommends that you estimate the amount you will need to borrow for your entire college career, but also be realistic about what you will be able to pay back.

A tool that can help is the Debt/Salary wizard from Mapping Your Future, an interactive calculator that helps determine how much you can borrow based on your estimated future earnings.

WHAT ARE THE MOST IMPORTANT DATES TO KNOW?

In previous years, the FAFSA opened on Oct. 1. This year, the government is making big changes and the application will be available in December, but the date has not yet been announced. The FAFSA application usually closes the following June.

Once the application is open, you need to check your state’s deadline to apply for state financial aid. Since financial aid is first-come, first-served, you’ll want to apply as soon as you can to qualify for both federal and state grants.

For private student loans, the timeline looks different. Private lenders require you to have proof of enrollment, so experts recommend you apply a couple of months before your tuition is due.

WHAT IS THE DIFFERENCE BETWEEN FEDERAL STUDENT LOANS AND PRIVATE LOANS?

Federal student loans are backed by the government and private loans come from banks, credit unions or other private institutions.

In general, federal student loans offer lower interest rates and more opportunities for affordable repayment plans, such as the Public Service Forgiveness Plan or the various income-driven repayment plans.

Kelly recommends that students try to only use federal student loans, though there are borrowing limits.

“More than likely, private loans are going to cost a student more over the life of the loan,” Kelly said.

Private loans come with a different set of requisites and application process.

WHAT IF I RECEIVE MORE MONEY THAN I NEED?

It’s recommended that you calculate the amount that you will need to cover your education before you accept a student loan. You might get offered a bigger loan than you need. If this happens to you, Mueller recommends that you return the money you don’t need, since it’s a loan at the end of the day and you will have to pay back that amount with interest.

If you find out that you’ll want to return student loan money, contact your school’s financial aid office to begin the process.

WHAT ARE SUBSIDIZED AND UNSUBSIDIZED STUDENT LOANS?

There are several different federal student loan options: direct subsidized loans, direct unsubsidized loans, direct PLUS loans and direct consolidation loans. But the most common are direct subsidized and unsubsidized loans, which are taken by the person who is completing the college degree.

Subsidized loans have their interest covered by the government and are granted to students with demonstrated financial need. Subsidized loans have their interest covered while you’re in school at least half-time, for six months after you graduate and if you qualify for deferment, which allows you to stop making payments temporarily. Unsubsidized loans are available to most students, but they are responsible for paying the interest.

WHAT SHOULD I KNOW ABOUT STUDENT LOAN INTEREST RATES?

Student loans must be paid back with interest, which is additional money that you pay for borrowing. The interest on your student loan depends on your type of loan and when your loan was made available for you to use for the first time.

If your loan is disbursed on or after July 1, 2023, but before July 1, 2024, you will have a fixed interest rate of 5.5%.

WHAT SHOULD I DO BEFORE I SIGN MY STUDENT LOAN AGREEMENT?

Before you accept your student loan offer, regardless if it’s federal or private, you want to make sure you understand the details, said Betsy Mayotte, president of The Institute of Student Loan Advisors. Those include when interest accrues, if interest is capitalized and if there are any late fees.

If reading the details on your own feels daunting, Mayotte recommends speaking with a financial aid counselor, either at your university or elsewhere.

If you meet with a counselor, it’s good practice to come with prepared questions about repayment programs for when you need to start paying back your loan.

Good questions to ask yourself or a counselor, according to Kelly, include:

1. If I get this amount of a loan as a freshman, is that rate going to be flat over my four years? Or do you anticipate that I’m going to need to borrow more each year?

2. Does my opportunity for scholarships go up so the amount I need to borrow can come down?

If you are taking out federal student loans, it’s a requirement that you complete an entrance counseling course. Kelly recommends that you pay extra attention to this process and not rush through it.

WHAT IF I HAVE QUESTIONS ABOUT MY STUDENT LOAN?

If you have specific questions about your student loans, there are many resources available. You can visit the Federal Student Aid website or reach out to your college’s financial aid office or community or non-profit organizations such as Mapping Your Future.

WHAT ARE SOME RECOMMENDATIONS TO MANAGE MY STUDENT LOANS?

Mueller recommends that you keep track of how much you are borrowing each year so you have an idea of how much you will owe by the end of your college career and how much your monthly payments will be.

Mueller also recommends that, if you are working during college, you consider paying some of the interest that accumulates each year.

“You’re not required to make those interest-only payments. But if you do, you’re saving yourself money in the long run,” Mueller said.

Interest payments while you are still in college are generally low, but they get capitalized once you’ve graduated or left school, which means your loan gets larger and you would be paying interest on the interest, said Mueller.

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