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Student Loans Advice
A Short Course in Student Loans
Student loans are serious business--they are one of the few obligations that can't be dumped in a bankruptcy, and there is no statute of limitations that applies to student loan collection efforts. Wrong choices in student loans can haunt borrowers, who are often young and financially inexperienced, for life. Here are some tips for funding your education with student loans.
Federal Student Loans vs. Private Student Loans
Federal student loans offer lower interest and better terms than private student loans. And if your income is low, or you choose to enter certain professions, your debt can even be partially forgiven. Even though they are government-subsidized loans, they can be obtained from banks and other lenders.
Private loans are more easily obtained. Applicants for student loans who desire larger amounts--or would-be students with bad credit--may find private funding the only option. Private student loans can come with interest rates comparable to that of credit cards--check the terms very carefully if you choose to go that route.
Government Student Loans: Subsidized or Unsubsidized
College students looking for loans may qualify for subsidized government loan programs. These need-based alternatives are offered to students and their families who meet certain income guidelines. Check the requirements for Perkins and Subsidized Stafford loans and see if you qualify because these programs offer the most desirable rates and terms.
Those whose personal or family situation doesn't qualify them for subsidized student loans may be eligible for unsubsidized versions. Interest on unsubsidized government loans does begin accruing when the loan is disbursed. You can choose to pay the interest while you are in school or defer payment until after graduation. Remember, however, that the interest is added to the loan principal and also accrues interest, so choose this option with care.
PLUS loans are another type of unsubsidized federal student loan. While PLUS stands for Parent Loan for Undergraduate Students, graduate and professional students are allowed to take out these loans as well. Good credit is required to qualify, however.
So Many Loans, Only One Form
Complete a Free Application for Federal Student Aid (FAFSA) before the start of each school year to apply for Perkins or Stafford loans, even if you don't expect to qualify for need-based aid or subsidized loans. Perkins Loans are offered through your educational institution. If a school is a member of the Federal Direct Loan program, then Stafford and PLUS loan applications also can be made through the school. Otherwise, you'll need to apply to a lender that participates in the federal student loan programs.
Getting it Together by Consolidating Student Loans
Some students choose to consolidate their federal and other student loans into a single loan. In the past, when all student loans came with variable rates, students would opt to consolidate their loans in order to fix their rates, lower their payments, and have only one monthly payment. Today, many student loan rates are fixed. Students need to compare available rates for their existing loans before consolidating.
Student loans are serious business--they are one of the few obligations that can't be dumped in a bankruptcy, and there is no statute of limitations that applies to student loan collection efforts. Wrong choices in student loans can haunt borrowers, who are often young and financially inexperienced, for life. Here are some tips for funding your education with student loans.
Federal Student Loans vs. Private Student Loans
Federal student loans offer lower interest and better terms than private student loans. And if your income is low, or you choose to enter certain professions, your debt can even be partially forgiven. Even though they are government-subsidized loans, they can be obtained from banks and other lenders.
Private loans are more easily obtained. Applicants for student loans who desire larger amounts--or would-be students with bad credit--may find private funding the only option. Private student loans can come with interest rates comparable to that of credit cards--check the terms very carefully if you choose to go that route.
Government Student Loans: Subsidized or Unsubsidized
College students looking for loans may qualify for subsidized government loan programs. These need-based alternatives are offered to students and their families who meet certain income guidelines. Check the requirements for Perkins and Subsidized Stafford loans and see if you qualify because these programs offer the most desirable rates and terms.
Those whose personal or family situation doesn't qualify them for subsidized student loans may be eligible for unsubsidized versions. Interest on unsubsidized government loans does begin accruing when the loan is disbursed. You can choose to pay the interest while you are in school or defer payment until after graduation. Remember, however, that the interest is added to the loan principal and also accrues interest, so choose this option with care.
PLUS loans are another type of unsubsidized federal student loan. While PLUS stands for Parent Loan for Undergraduate Students, graduate and professional students are allowed to take out these loans as well. Good credit is required to qualify, however.
So Many Loans, Only One Form
Complete a Free Application for Federal Student Aid (FAFSA) before the start of each school year to apply for Perkins or Stafford loans, even if you don't expect to qualify for need-based aid or subsidized loans. Perkins Loans are offered through your educational institution. If a school is a member of the Federal Direct Loan program, then Stafford and PLUS loan applications also can be made through the school. Otherwise, you'll need to apply to a lender that participates in the federal student loan programs.
Getting it Together by Consolidating Student Loans
Some students choose to consolidate their federal and other student loans into a single loan. In the past, when all student loans came with variable rates, students would opt to consolidate their loans in order to fix their rates, lower their payments, and have only one monthly payment. Today, many student loan rates are fixed. Students need to compare available rates for their existing loans before consolidating.
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