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How Student Loans Impact Taxes Explained by Your Tax Specialist in Denver

September 6, 2017

For a majority of American college students must take out student loans in order to pay for their education. In fact, the average amount of student loan debt a student graduates with is close to $40,000. For those who fear college because of debt, there are options. From browsing tuition rates to getting scholarships, there are ways to limit the amount of student loans to take out. Learn more about student loans, the Free Application for Federal Student Aid (FAFSA), types of student loans, and about paying them back from your local tax specialist in Denver.

Intro to Student Loans and FAFSA

Student loans are options for those who would like to go to college but do not have the financial capabilities to do so. To get started with the student loan process, students will fill out a FAFSA. This will determine the amount of money a student can receive for the upcoming school year. Prior to each school year, a new FAFSA will have to be filled out. To fill it out, students and applicable parents just need to have previous tax returns ready. The FAFSA will also let the student know if they qualified for any state or federal aid—this is the best way to go as free money that does not have to be paid back! To get started with the FAFSA, visit the U.S. Department of Education’s page about applying for aid.

Types of Student Loans

When it comes to top types of student loans, there are two: federal and private. Federal loans are provided by the U.S. government, while private loans are by a lender—similar to if you were to get a loan at a bank. Ideally, many students opt for premier federal loans as they have more benefits such as fixed interest rates. Within federal loans, they can either be subsidized or unsubsidized. Subsidized loans are available to students to are able to provide financial need through filling out the FAFSA. With this type of loan, the government will pay the interest too as long as the student meets certain requirements. Anyone can get an unsubsidized loan and the school the student plans to attend will note how much is needed based off their tuition rates. Students are responsible for paying back the interest on these loans.

Paying Back

Students do not have to begin paying back their student loans until after they graduate. On average, there is a six-month grace period between graduating from college and having to pay back loans. This gives the student time to find a job. It is best to talk to the company the student loans are through to see what the grace period time is. Once you are paying loans back, it is crucial to pay them on time as late student loan payments can severely damage the quality of one’s credit. For students who experience a major life event and are unable to pay your loans, you can put in a request for deferment. If approved, you will temporarily stop making your payments.

Whether you have questions about your student loans, or need to know what to do when tax season arrives, Bloch, Rothman and Associates if your premier accountant. As your go-to, we will help make sure you are set with your student loans when tax season comes around. Be sure to read more about filing your Denver tax return as a student and call us at 303-321-7160 to get started.