What You Don’t Know About Student Loans Will Cost You
Money for college isn’t that hard to get a hold of, as there are many sources available that can loan you this money. The problem is that most people don’t understand the types of loans that are available, what they must do to get it and how they must pay it back. Don’t let this be you. Read further into the article to learn about the various student loans and how to repay them. You might find that you learn something more than what you already know and heard.
When you need money for college, you’re going to look toward an array of sources. You have free sources of money that include grants and scholarships but these are not just all you have. You’ll also have the option to take out student loans, which must be repaid eventually. Remember that loans accrue interest so not only are you paying back your borrowed amount but you’re also repaying it back with interest. Think of it this way… a typical college graduate will take 10-plus years paying off their student loan.
One of the more costly investments you make is getting your college education. Based on the 2007-2008 data from the National Post secondary Student Aid Study, about 66 percent of all undergraduates received financial aid to assist them in paying for their education. “For those who received any aid, the total average amount received was $9,100. Fifty two percent received grants averaging $4,900, and 38 percent took out an average of $7,100 in student loans.” (Source: NCES)
Money for college in the form of federal and private aid isn’t reserved exclusively for undergraduates. Parents of incoming and continuing students as well as graduate students have much more financial leverage than the undergraduates do. “Four percent of students had parents who took out an average of $10,800 in Parent PLUS loans. Parent PLUS loans are included in total aid but are not included in student loans because they are loans for parents of dependent students.” (Source: NCES)
A Brief Look At The Different Kinds Of Student Loans You Can Qualify For College.
They are:
- Federal student loans
- Private student loans
- Student consolidation loans
- Alternative loans
- Bad/Poor Credit Loans For Students
- Institutional Student Loans
Federal Student Loans
Students attending college and parents who want to help to pay for the costs associated for college so their child can go are able to turn to the Federal Family Education Loan Program, which was designed to do this very thing, all funded by the United States government. This loan program includes three types of federal student loans:
- Stafford Loans
- Perkins Loans
- Student Consolidation Loans
Students who file their FAFSA every year will immediately be considered. Now the Stafford Loan has two versions, which are subsidized and unsubsidized. It’s also the most used student loan, as nearly every student will qualify for aid in this program.
There are several benefits to having federal student loans and they include:
- Lenient repayment policies
- Lower fees
- Low interest rates
Federal student loans also have flexible repayment terms not generally seen with a standard bank loan. Thus, a college education is a bigger, more convenient reality, which is great when you need money for college. Plus, these loans don’t need to be repaid until you have graduated from college.
Private Student Loans
Many times a federal grant, scholarship or a federal loan is not going to be enough to pay for a college tuition; thus, a private student loan could be the answer. These are loans that come from various outside sources such as Wells Fargo, Bank of America or Chase. They’re designed to fill in that gap that the other monies didn’t fill in. Bear in mind that private student loans, while helpful, generally have high interest rates and fees. Plus, you’ll need to have good credit or have a co-signer with good credit. It’s usually for those reasons that the federal student loans are picked at first when people still need money for college. When used right, these loans can pay for the college amenities that include books, computers, room and board, etc.
Student Consolidation Loans
You can also consolidate your student loans especially if you’ve got several loans or loans with high monthly payments. They are popular because no one wants to go into default on their student loans. For that reason, the Federal Family Education Loan Program has a federal consolidation loan it offers. Now, private lenders will also offer this loan type as well. Don’t default on your student loans before you find out if you are approved for a student consolidation loan.
Alternative Student Loans
When you’re talking about alternative student loans, it can also include private student loans along with other loans that don’t fit into any one category. This money for college need can include the PLUS Loan (Parent Loan for Undergraduate Students), which helps parents pay for their child’s college tuition. Graduate loans would also fall under the category because they’re reserved for students who are pursuing an even higher degree than a bachelor’s.
Bad Credit Student Loans
With the current state of the economy, applicants for student loans with bad credit will have a tough time finding funding other that federal financial aid. There are many students going to college who have bad credit or no credit at all although many people fall under the assumption that if you have bad credit, you won’t be able to get a student loan. Not true. Federal loans, unlike private loans, do not require a credit check. There are also other loan lenders that don’t require your credit history to give you money for college.
Look for Private Student Loan Lenders with the following characteristics:
- Direct Student Loans
- Fast Student Loans
- No Credit Check Student Loans
- Bad Credit Student Loans
Beware of high interest rates from private student loan lenders who give you a loan if you have bad credit.
These options are wonderful if your credit history is less than stellar and you want to go attend college.
Institutional Student Loans
There are many universities/colleges that offer an institutional student loan with varying interest rates and terms. If you want to know if your college has their own institutional student loan, make sure to speak with the financial aid department; see what they have and what benefits go along with them.
How To Manage Your Student Loan Wisely
When you have a student loan that’s to fill a “money for college” need, you have several management options you need to understand.
First, look at the advantages for the student loan forgiveness programs. These programs are aimed at med students, nursing students, students going into the military, teachers, etc. To qualify, you should be ready to work/serve for a certain period of time to have some, if not all, of your student loan forgiven.
Second, be sure you make consistent, timely loan payments because many lenders, in time, will reduce your interest fees. If you’re always delinquent, look out for a student consolidation loan program. Don’t default on your student loans since you may need money for college later.
Third, use online calculators to manage the loan repayment. With these, you can determine what the loan repayment with interest is going to be.
Fourth, there are some vital college financial aid tax credits the federal government offers, which are the Hope Scholarship Credit and the student loan interest deduction. Always have these deductions on your tax preparations every year.
Three Helpful Tips For Student Loans
Make sure you supplement your student loans with other options such as free aid or savings. Your parents may have even had a college savings plan (529 savings plan) set aside for you so make sure to utilize this money. Be sure to apply for all grants and scholarships.
Ensure that you understand all the terms/details of the federal and private student loan contracts. Remember, once you get them, you’re stuck until it’s paid off.
Never miss your payments. When you need money for college and the bank or government loans it to you, you’re going to be expected to repay it back in a timely manner. Make sure to speak with your lender if you’re having problems. Once you go into default, it’s difficult to get a consolidation loan. Student loans that are in default have grave consequences and can obliterate your good credit rating.
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