Different Types of Student Loans
When you decide to make the decision to attend a college or university to further your education, understanding student loans is a very important part of that process. Chances are, in your early 20’s you don’t have the finances to pay the institution directly, therein lies the importance of knowing your options. There are many different options available to you as a student, you just need to educate yourself on all of them and choose the one the lends the best options for you. It is important to know the difference between federal student loans, private student loans and consolidation loans. This may seem like an overwhelming amount of information, but take your time reviewing and understanding each value and asset to you and make an informed decision.
Federal Student Loans
This type of loan may be the most attractive to those students who are looking for low interest rates, longer terms, postponing payments until after college and less stringent credit requirements. The two major types of federal student loans are the federal Stafford loan and the federal perkins loan. The federal Stafford loan consists of two types of loans, subsidized and unsubsidized loans.
The subsidized Stafford loans means you are not responsible for the interest accrued while you are in school and during the period of time you have chose to defer the payment. You will only become responsible for the accrued interest after college when you begin to start paying back the loan. The unsubsidized Stafford loans make you responsible for the interest accrued from the time you take the loan, this includes while you are in school and after you start paying the loan back. The eligibility requirements for each of these loans are as follows:
• You must submit a free application for federal student aid (FAFSA)
• For subsidized student loans, you must have financial need as determined by your school
• You must be a US citizen or national, a US permanent resident or eligible non-citizen
• You must be enrolled or plan to be enrolled at least half-time
• You must be accepted for enrollment or attend a school that participates in the federal family education loan program
• You must not be in default on any education loan or owe a refund on an education grant
• There is no credit check required.
If you receive your loan after July 1, 2006 your interest rate will be fixed at 6.8%. Some fees may also apply to your loan. Talk to your agent to discuss the possible loan limits you may be eligible for as well as a repayment schedule that best fits your life plan.
The Perkins loan is used to help those students with an “exceptional” need for financial assistance. The loan has a low 5% fixed interest rate and can be used by undergraduate or graduate students. The eligibility requirements for this type of federal loan include:
• Enrollment in an eligible school at least half-time in a degree program
• US citizenship, permanent residency or eligible non-citizen status
• Maintain satisfactory academic progress
• No unresolved defaults or overpayments owed on Title IV educational loans and grants
• Satisfaction of all selective service requirements
“The US Department of Education provides a programmed amount of funding to the school. Then it’s up to the school to decide which students are in the greatest need of funding. The school will then combine federal funds with some of its own funds for loans to qualifying students.”
Private Student Loans
After you have done everything that you can do, and you still need more money, then it may be time to consider a private student loan. These types of loans should only be used as supplemental funding when all other options have been considered. There are many different types of loans for the students, parents or graduate students, and you can even get these types of loans tailored for a specific course of study. Because there are various types of loans, it is important to remember that the criteria and eligibility for each loan is different. Do your research to make sure that you can hit all of the qualifications for the loan that peaks your interest. Even if you have good credit, if you can find someone to co-sign for you, you are likely to receive a better rate on your loan. Have an agent help you go through all the pros and cons of each specific private loan and make an informed decision. This information may sound like repetition to you, but trust me when I say that it will affect your life for a great deal of time, so getting good rates and terms are very important things for you in the long run.
Consolidation Loans
When you combine one or more existing private student loans into a single loan, thereby consolidating your payments into one payment, usually lowering your monthly payments, you have successfully consolidated your student loans. One key element to consolidation loans is that it greatly reduces your monthly payment because it allows you to stretch the term from the standard 10 years to up to 30 years depending on the amount of debt.
These were just a few of the options you will have to choose from as a student going to college. They can be confusing and there is so many options, it is just important that you sit down with a professional and let them walk you through all of your options step by step, thus allowing you to make an informed and intelligent decision that will affect your life for a long time down the road.
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