Loans: may the odds ever be in your favor?

This weekend reality started sinking in. I just graduated college, and I am getting emails about preparing to pay off my college loans. The grace period will be ending by July and I will have to make monthly payments on my student loans. To get through college, I borrowed enough money that I could have had a decent car. Thanks to the email, I'm realizing just how long I'll be paying off my loans: FOREVER.

Okay, so forever is an exaggeration, but SERIOUSLY. I borrowed enough money to keep me going for a long while. Do I regret taking them out? No. Honestly, they saved my butt in college. They took the pressure off me having to pay bills while I was away. But they do have to be paid back, and although it sounds ridiculous that I could be paying them off while my kids are preparing for college (if I even have kids), the reality is that my own parents are still paying loans back. It just becomes a part of life.

Here are some facts you should know about undergraduate college loans, in layman's terms. There are two ways to borrow money: fedearal and private.

Federal loans are cute, like Annie, or a puppy. They have relatively low interest rates of around 4% (the amount varies over time). They let you feel like nothing can go wrong, because you don't have to pay anything until you're out of school, which gives you a false sense of freedom to live life to your heart's desire.

The caveat: subsidized loans, which don't build interest while you're in school, are limited based on financial need. So if your parents make too much money, you won't get much satisfaction before you max out your subsidized loans. On the other hand there are unsubsidized loans, which allow you to borrow more money than subsidized except interest accrues immediately.

Additionally, if you max out your borrowing limit every semester, there is a chance you will reach your limit of federal loans for your entire undergraduate career, before you actually graduate. If that happens, you have to resort to private loans

Private loans are more intimidating, like Daddy Warbucks or a gorilla. You have to learn how to respect them and earn their respect. The interest rates are much higher, sometimes around 10% and start accruing right away. Pick a hypothetical loan amount and compare an added 4% with an added 10% to get an idea of what that means for your bank account.

So, if you're like me, prepare for a long road ahead of you paying for your loans. If you don't want to be paying for loans until your own kids go to college, start making a plan now.