Many students that enter college need financial aid. College financial aid
provides for instruction as well as the costs of books. But, usually, it does
not provide for living arrangements or meals. These are added expenses most of
the time.
Federal financial aid or Federal student loans are very common choices for
college. Federal financial aid are usually grants which do not have to be paid
back. Federal loans are loans backed by the government and do have to be paid
back but with a low interest rate. These loans usually have ten years to be paid
back. These loans are usually referred to as direct student loans as they are
paid directly to the higher learning establishment.
Finding the right student loans for your child can seem a bit overwhelming.
It can become worrisome if you do not get the information you are looking for.
So, what can you do to prepare for your student's expenses? First, once the
school has been chosen, make an effort to go to or contact the school's
financial aid offices. These people can help you one on one and evaluate your
needs. They job is to provide you with information about funding your child
education. Of course, they want your child to attend their school, so they will
offer you ever bit of advice you need. But, you can also find this information
online as well as at local libraries. Forms will be available there.
There are many types of student loans to choose from, and it’s important to
find one that is right for your particular situation. The two main types of loans are federal loans and private loans.
Types Of Student Loans: The following types
are student loans are available:
1. Federal Stafford Loans: These are awarded based on financial need and are regulated by the federal government. They can be obtained from a bank, credit union, or directly from the government.
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There are three kinds of Federal Stafford Loans to choose
from:
- Subsidized Federal Stafford Loan - This loan is long-term and need-based, with a low-interest rate. The term "subsidized" means that the government will pay the interest on the loan while a student is in school or when the student requests a grace period or deferment.
- Unsubsidized Stafford Loan - This loan is long-term, non-need-based, with a low-interest rate. This type of loan is best for students who don't qualify for other types of financial aid, or who still need more money in addition to other forms of financial aid. Almost all household incomes qualify, and "unsubsidized" means that the interest on the loan is the responsibility of the borrower. In some cases, however, payments can be postponed.
- Additional Unsubsidized Stafford Loan - These loans are reserved for borrowers that are classified as independent students, as determined by Federal guidelines.
2. Federal Plus Loans: These loans are available to parents whose children are attending college as full or half-time undergraduate students. They are awarded based on credit history and cost of attendance. The interest is low on this type of loan, but repayment usually begins within 60-90 days after full disbursement of the loan, or after the student graduates.
3. Federal Perkins Loans: Perkins loans are awarded to students based on extreme financial need, and usually have very low interest rates. The total funds available to be disbursed for these loans is limited, however, which means that the amount of the loan will likely be relatively low. The interest doesn't start to accrue until 9 months after a student drops below half-time enrollment or graduates. If you're not sure if you qualify for a Perkins Loan, ask a college financial aid advisor. One important thing to note about these loans: they are reported to a credit bureau, which means that if you are late on payments, or default on your loan, it could damage your credit.
4.
Private student loans: If you don't qualify for federal loans, then you might consider looking at private lenders. Banks, lenders and credit
unions provide student loans at relatively low interest rates. They represent an alternative to
government-based loans and are sometimes referred to as "Alternative
Loans". These loans help students and parents bridge the gap between the cost of education and other sources of funding. The lender will determine the terms and conditions of the loan and may require a cosigner - especially if you do not have sufficient credit history. Each institution is different, so be sure to check out the terms and conditions of any loan you obtain, federal or private, and make sure you know the details before signing on the dotted line.
Take a few minutes and plan out your ideas for funding your child's
education. And since many of us have not been able to save for their future, we
must take the time to find the lowest interest rate loans available to do so.
Spending this time learning, will enhance and empower you to help your child
with their learning.
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