Question 1

What are the opportunity costs associated with Student loans?

Accepted Answer

The answer of What are the opportunity costs associated with...

Question 2

Name the four common loans available for college students.

Accepted Answer

The answer of Name the four common loans available for...

Question 3

When do the payments on a Stafford Loan begin?

Accepted Answer

Stafford Loan payments typically begin six months after the borrower graduates, leaves school, or drops below half-time enrollment, not based on the options provided in A, B, or C.

Question 4

Name two tax credits available to help offset education costs.

Accepted Answer

The answer of Name two tax credits available to help...

Question 5

Under a Stafford Loan,parents borrow money for their child's education.

Accepted Answer

Under a Stafford Loan, the student borrows money for their own education, not the parents. Parents can borrow for their child's education through a PLUS Loan.

Question 6

The interest that you pay on your student loans will lower your taxable income if you meet IRS guidelines.

Accepted Answer

This is true. The IRS allows for the deduction of up to $2,500 in student loan interest paid annually, which can lower your taxable income. However, there are income limits and other eligibility requirements that must be met to claim this deduction.

Question 7

An advantage that direct or subsidized student loans have over other types of loans is

Accepted Answer

Direct or subsidized student loans often offer after-tax interest rates that are more attractive compared to other types of loans, and they allow borrowers to access funds at below-market rates without the need for a credit check. This makes them particularly beneficial for students who may not have an established credit history or sufficient income.

Question 8

Student who are awarded grants must pay back a percentage of the amount after graduation.

Accepted Answer

Grants are typically given as a form of financial aid that does not have to be repaid. However, some grants may have certain conditions, such as maintaining a certain GPA or pursuing a specific field of study, and failing to meet these conditions may require the student to repay the grant. But in general, grants do not have to be paid back.

Question 9

Under a Federal Direct Loan,you don't begin making payments until six months after graduation.

Accepted Answer

This is true. Federal Direct Loans have a six-month grace period after graduation before payments are due.

Question 10

Student loans are a smart source of financing for school because you only pay part of the interest charges and the rest is subsidized by the lender.

Accepted Answer

Student loans can be a necessary source of financing for school, but not all student loans offer subsidized interest. Subsidized loans, where the government pays the interest while you're in school, are available based on financial need. Many student loans, especially private ones, accrue interest that the borrower is fully responsible for.

Question 11

________ is when a borrower is allowed to temporarily stop making student loan payments for a qualified reason such as an illness,financial hardship,or serving in a medical or dental internship or residency.

Accepted Answer

Forbearance is a temporary suspension of student loan payments where the borrower is still responsible for interest that accrues during the forbearance period. Deferment and delinquency are different concepts. Deferment allows a borrower to temporarily postpone repayment of the principal and interest of a loan, while delinquency is when a borrower misses a payment or is late with a payment. Default occurs when the borrower fails to repay the loan, and can have serious consequences such as wage garnishment and negative impacts on credit scores.

Question 12

A federal direct subsidized loan has tremendous advantages over other types of loans,including

Accepted Answer

Unlike other types of loans, federal direct subsidized loans offer the advantage of deferring the interest while the borrower is still in school. This means that the borrower does not have to worry about making interest payments while studying and can focus on their education. Therefore, option A is the correct answer. Option B is incorrect as it mentions low monthly payments but also a large balloon payment after five years, which can be difficult to manage. Option C is incorrect as the add-on method is not used to determine monthly payments for federal direct subsidized loans.

Question 13

The ________ is the automatic repayment plan with a 10-year term.

Accepted Answer

The 10-year term matches the standard repayment plan, which is option B. Extended repayment has a term of up to 25 years, income-based repayment adjusts payments based on income, and graduated repayment starts with lower payments that increase over time.

Question 14

Student loans are loans with federally subsidized interest rates given,based on financial need,to students making satisfactory progress in their degree programs.

Accepted Answer

Student loans are indeed loans with federally subsidized interest rates given to students who demonstrate financial need and are making satisfactory progress in their degree programs.

Question 15

When borrowing for college,one thing to keep in mind is that you're not just paying for one year of school.About half of all colleges practice what is called "front loading of grants," which means that

Accepted Answer

Front loading of grants means that colleges are more generous with their financial aid packages during a student's first year, and gradually reduce the amount of grants and scholarships awarded in future years. It's important for students to consider this when taking out loans or planning their finances for college, as they will likely need to cover more of their expenses with loans or outside sources of funding in later years.

Question 16

Direct subsidized loans are made only to undergraduates who demonstrate financial need.

Accepted Answer

Direct subsidized loans are designed to help undergraduate students who have financial need, which means they have not exceeded the cost of attendance at their school. The U.S. Department of Education pays the interest on these loans while the borrower is enrolled in school at least half-time, during the grace period, and during deferment periods.

Question 17

A 529 plan is a tax-advantaged savings plan designed to encourage parents to save for future college costs for their children.The plan comes in two forms: pre-paid tuition plans and college savings plans.

Accepted Answer

This statement is true.

Question 18

Income-based repayment plans are based on a percentage of discretionary income,not the amount owed,and provide a 25-year term of payments before loan forgiveness.

Accepted Answer

Income-based repayment plans calculate the monthly payment based on a percentage of the borrower's discretionary income, not the total amount owed. These plans typically have a 20 or 25-year term of payments before loan forgiveness.

Question 19

Frank ran up a large credit card bill as an undergraduate student,he also took out as much in student loans as possible.He is now unable to pay his credit card debt and his student loan debt.However,he has decided to declare bankruptcy to eliminate his debt.Frank will be able to eliminate his federally subsidized student loan debt by declaring bankruptcy.

Accepted Answer

Frank will not be able to eliminate his federally subsidized student loan debt by declaring bankruptcy. Student loans are not typically dischargeable in bankruptcy, except in rare cases where the debtor can prove undue hardship.

Question 20

Which statement is true regarding direct unsubsidized loans?

Accepted Answer

Direct unsubsidized loans are made to undergraduate, graduate, and professional students. They differ from subsidized loans in that the student is responsible for paying the interest that accrues while they are in school and during grace periods and deferment periods. There is no requirement for demonstrating financial need in order to receive a direct unsubsidized loan.

Quiz 7: Student and Consumer Loans: the Role of Planned Borrowing