Students of all economic backgrounds are frequently obligated to borrow money in order to pay for higher education. Unfortunately, tuition continues to inflate and certainly, the low-cost public universities no longer exist.
Low-income students should initially consider grants and scholarships that don’t require repayment. There are actually private scholarships that are often geared to students in need.
One of the things that ANY student should consider is scholarships. Scholarships are available to almost anyone, and many of them do not depend on academic achievement or the specific state of financial need. The beauty of a college scholarship or grant is that unlike a loan, a scholarship or grant does not need to be paid back.
In 2005, amazing numbers reveal that the average graduating senior of a four- year college owes around $19,000. Bottom line, it takes substantial planning to make it through the college years and thereafter.
Students and parents must know that they have the option of federal or private loans. The secret to successful borrowing is choosing the right option to help fund each individual’s college education. College financial aid offices sometimes assist parents with this complicated process. Most parents find themselves drowning in a sea of direct government programs and private loan subsidies which are loaded with various terms, conditions and discounts. Therefore, the offices develop a “preferred lenders” list that consists of half-dozen or so lenders that have agreed to favorable terms in return for a portion of the volume gained by the school loans. Due to the current status of loan volume, the student loan market is an $85 billion business.
A familiar student loan is the Federal Stafford student loans. Although the Stafford loans have become a necessity in financing the increasing cost of colleges and universities, it does not cover every day expenses. Government sponsored loans only cover tuition. The Stafford loans are to be repaid after graduation. It also offers the student the option of deferring the payments for six months after graduation. There is a standard ten year repayment term.
To date, the students or parents are able to directly borrow money from companies utilizing the internet, which ultimately saves them money by lowering interest rates and eliminating any finances that the college would receive.
Additionally, the student may apply for a private loan. One of the most common private loans is the Sallie Mae. The private loan is borrowed to finance all of the expenses of today’s expensive education. More so, these loans are based on credit criteria established by the lender. There is a six month grace period following graduation that the student is required to begin repayment. There is a standard fifteen year repayment term.
Stafford loans make up over fifty-one percent of all financial assistance whereas the private loans accounts for twenty-seven percent. If students are credit-worthy, they may be eligible to receive up to $40,000 a year from private lenders. By comparison, federal loan amounts are limited by year status. Specifically, freshmen receive up to $2625 year while the third and fourth year students receive $5500 year. Of course, private student loans have gained substantial popularity throughout the country.
In addition to the eligibility requirements and differentials, students and parents must be aware of the interest rates and fees that come along with the loans. The student is encouraged to choose his college loans carefully for these terms of conditions could be a tremendous financial setback if not comprehended well.
Federal Stafford Loans are noncredit based. They have a variable interest rate that is reset annually. There is a cap at 8.25%. During the time the student is in school, the rate is 4.7%. When the loan is in deferment status or a grace period, the interest rate is also 4.7%. During the repayment status, the student is required to pay a 5.3% interest rate. There is an initial fee of three percent. There is also a guarantee fee of one percent.
Because private loans are distributed according to credit history, the interest rates vary based on the same. The lowest rates are available when both the student borrower and co-signer are credit approved. The variable interest rates are reset monthly. The student may be charged a three percent repayment fee. No matter what type of loan you may consider, be conservative and borrow wisely. And remember, student loans must be repaid, whether federal or private.
If you have already over-extended yourself with college student loans, you may be able to find some financial breathing room via a Student Bill Consolidation Loan. This is a way for students to pay their bills and loans off faster. This loan will combine every bill and leave you with one single payment.
If you are a home owner, you may want to look at Home Equity Loans as being a great source for a low interest loan with easy payback terms.