Depending upon the type of loan and its source, repayment options may vary. Some companies or employers may even help students repay their loans if they are going to work in an industry with high demand. No matter how a student decides to repay their loan, financial advisers recommend that students pay more than the minimum payment if possible. Simply making minimum payments will keep students in debt longer and could affect their credit score.
As a portion of a balanced financial aid package, a loan is a safe tool to help a person complete their college education. Like any other financial instrument, students should read the terms and conditions of a loan carefully before signing for it. Students should apply for a loan only at a reputable source. They should also keep all documentation from the loan for 3 to 5 years after it is paid off.
Choosing direct student loans allows people to attend the college or university that they want. With a person’s education becoming increasingly important in a global economy, attending college and graduating is crucial. The cost of tuition should never be an obstacle to receiving a college education. Direct student loans will provide a way for anyone to attend their college of choice.
Attending a college or university can present significant financial hurdles for prospective students. Tuition costs are relatively high for even a single credit hour. In addition, yearly tuition increases have sent the costs to student’s sky high. Even with savings, most students will be unable to afford a college education on their own. Choosing direct student loans are a safe and effective way for students to spread the cost of college out over several years.
Tuition costs can differ depending on the type of college or university that a student wants to attend. For the 2010 school year, tuition costs averaged $7,020 per year at four-year public colleges and universities. However four-year private colleges and universities had an average annual tuition cost of $26,273.
Direct student loans allow students to break up the upfront tuition cost into smaller payments. Students typically receive their loans on a yearly or biyearly basis. They pay for their tuition and then the loan must be repaid in periodic installments while the student is in college or at a later date.
The federal government offers 4 different kinds of direct student loans. These include:
Subsidized loans are given out based upon a student’s financial need. If a student is attending at least half-time, they will not be charged interest while in school or during the grace period after graduating.
Unsubsidized loans are not awarded because of financial need. Interest will be charged to students at all times. This includes during the time a student is attending college.
PLUS loans are unsubsidized. They are awarded to the parents of students. Students must be dependent upon the borrowing parent. PLUS loans are also available to graduate and professional students. Interest loans are charged at all times, similar to unsubsidized loans.
PLUS loans require a credit check for borrowers. If a borrower is denied a PLUS loan, they still may be able to able to receive it with a co-signer. A co-signer, also known as an endorser, will have to repay the PLUS loan if the borrower is unable to.
A consolidation loan combines any federal student loans into a Direct Consolidation Loan. This can make repayment easier for students with multiple loans from the government.
Each of the loan categories has different loans. For example, some possible loans include the Perkins or Stafford loans. Each loan caters to different types of students. Government student loans carry fixed interest rates. Students’ loan repayment conditions are typically tied to whether they are attending college at least half-time or whether they have graduated or not.
Borrowers can only receive a certain amount of money from subsidized and unsubsidized loans each year. The maximum amount is determined by a student’s grade level and whether they are a dependent or independent student. Some colleges may have additional rules about the maximum amount a student may receive.
Applying for any of the government loans requires students to fill out a Free Application for Federal Student Aid (FAFSA). It is submitted to the colleges or universities a student wants to attend. A FAFSA must be resubmitted with updated information each year.
Banks, credit unions, and lenders may also offer loans designed for students. Their rates and terms may be more negotiable than government loans, but can also come with higher interest rates. Some private lenders may have stricter repayment penalties as well. However there are many more banks, credit unions, and lenders compared to only one federal government. Savvy students may be able to find great loans in the private sector.