Students must go through an online process that supposedly teaches them about federal loans in order to receive them. However, students are more confused than ever when it comes to the loans they are accepting.
More than 90 percent of students do not know which type of loans accumulate interest during school and which do not, according to a survey conducted by LendEDU.
“I wish loans were as easy as Pokémon,” said Ijeoma Onyekwe, 21, a junior public relations major at the University of North Texas. “It’s laid out for kids to understand, and it just caught on. I don’t think adults even really understand loans.”
Like Pokémon, loans come in many different forms, with Stafford loans being the type commonly provided by the government. These loans come in two forms: subsidized and unsubsidized. According to the U.S. Department of Education, subsidized loans have a fixed rate of 3.76 percent or lower, and the government pays the interest for the student.
Consider this your starter pokémon, or the one you are awarded at the beginning of your game.
Unsubsidized loans have a fixed interest rate of 3.76 percent, but unlike subsidized loans, the student pays the entire interest rate, according to the department of education.
Consider these like wild pokémon; Still valuable, but not as advantageous as a Charmander or Pikachu.
These loans are also limited based on how many years you have attended college. That limit can be met by combining the two types of loans, or like building the team you will use as you battle other trainers.
“Subsidized are all I use: I don’t even accept unsubsidized loans anymore,” said Megan Mingo, 21, a junior communications major at UNT. “I hadn’t realized until my sophomore year what they really meant.”
Private loans are different from Stafford loans. These loans depend on credit history rather than financial need. The interest rates of private loans depend on the LIBOR and PRIME index. LIBOR, London Interbank Offered Rate, is the average interest rate paid on deposits of U.S. dollars in the London market. Private student loans typically are based on either a 1-month or 3-month average of the LIBOR index.
PRIME, or Prime Lending Rate, is the rate banks charge their most creditworthy customers. These indexes are similar to comparing the levels of your Pokémon against the others you encounter as the game progresses.
“I prefer private loans, actually. The whole FASFA process is tedious,” Marsden King, 19, a sophomore computer science major at UNT said. “I just pay what I can and use the loans to cover everything else.”
Student loans have evolved over time and can become a hassle if not understood early. Students can visit the Student Money Management Center for useful websites and guides on the various types of loans. With training and patience, you’ll be able to manage your loans as easily as a wild pidgey.