Understanding Student Loans

Understanding Student Loans

Students who opt for higher studies often find that they lack the required capital to fund their anticipated study program stretching perhaps to several years. Fortunately, there are many institutions that a student can turn to for assistance for financing his education program. Except in the case of grants and scholarships, all other loans taken have to be re-paid; and unfortunately this fact does not strike the borrower forcefully enough at the time of obtaining loans. The obvious reason for same is since many repayments start only on graduation; and due to a feeling of satisfaction for the time being at finding the funds to cover more and more of the direct education costs and other education related expenses.

There is a cost attached to every loan that you take and it is very important that you educate yourself first on the types of loans available, which carry fixed as well as variable rates of interest during the lifetime of the loan. Even at fixed rates, the rates attached to different types of loans differ, as does the repayment periods, deferment options etc. It is also pertinent to visit websites of different lenders and do an in-depth study of the diverse packages on offer and / or negotiable, incorporating varying concessions on credit terms with regard to rate of interest, repayment period, deferment options etc; so that you can select the type and lender that best suits the circumstances on a case by case basis.

For purposes of college education, it is the Student Loans (except for limited Perkins Loans) that carry the most favorable all-round terms than any other general financial loans, and as such your search should mainly be confined to all types of student loans only.

1. Student Loans may be classified broadly under 2 categories:

(a) Federal Loans

Government sponsored loans executed via the Federal Family Education Loan Program (FFELP) and generally carry fixed, low interest rates; Perkins and Stafford Subsidized loans are need based while Stafford Unsubsidized and PLUS loans are not need based; but do not generally cover related costs of education such as tuition, books, computers, board and living expenses etc. Multiple options for re-payments and deferments may be available. Can be obtained through schools, banks and other student loans lending institutions

(b) Private Loans

Granted by private lenders and are obviously at higher interest rates than federal loans, but you do not have to show financial need for the amount of the loan and there is also no maximum limit, but have to show a good credit score. Deferment options may be obtainable (though at a price). Credit terms obtainable can be further improved by getting a good cosigner to support your loan application. A parent can apply on behalf of a student as a co-borrower to take advantage of his / her good credit score, but the responsibility for the loan lies with student as well as co-borrower parent.

2. Federal Loans comprise mainly of 3 types of loans:

(a) Perkins Loans

To qualify, have to establish “need” for exceptional financial aid, and be enrolled in school at least half time. Carries a Government subsidized fixed interest rate of 5%. Borrowing is limited to $ 4,000 for undergraduates and $ 6,000 for graduates.

(b) Stafford Loans

General conditions applicable for all types of Stafford Loans

To qualify, have to be already enrolled in a college at least half time or planning to be enrolled at least half time in a school participating in the FFELP Scheme, sometimes trade and business schools also may be considered; but those attending full time could obtain enhanced loans than those attending half time. Interest rate is currently fixed at 6.8%.

The applicant has to show the need for financial aid in respect of Stafford Subsidized Loans, (although it is not necessary to show need for financial aid to get a Stafford Unsubsidized Loan). No credit check is required; loans are low interest bearing at a standard fixed rate. Stafford Loans come in three types with prefix “Subsidized”, “Unsubsidized” and “Additional Unsubsidized”.

Essential differences between Subsidized & Unsubsidized Stafford Loans

The meaning of “subsidized” in the context of these loans is that the federal government guarantees the loan and also pays the interest component of the loan while the student remains at school as well as in the case of any and every occasion a deferment of payments is allowed to the student on request. In the case of unsubsidized loans the student undertakes to pay the interest as well and although deferments may be allowed, the consequent accrued interest also has to be paid by the student, thereby adding to the total cost of the loan.

Stafford Subsidized Loan

Log term, low interest, need based which has to be shown by filling a FAFSA form (Free Application for Federal Student Aid), but no credit check is required;, Loan guaranteed by federal government and interest too paid by government, postponement of payments possible in some cases and if allowed, accrued interest thereon too will be paid by the government.

Stafford Unsubsidized Loans

Log term, low interest, not need based, no credit check, interest is paid by the student; postponement of payments is possible in some cases, but accrued interest thereon is payable by the student. More suitable for those who don’t qualify for other loans or those who still need additional funding for their education.

Stafford Additional Unsubsidized Loan

Federal guidelines classify certain students as “Independent Students”. Another branch of Unsubsidized Stafford Loans known as Additional Unsubsidized Stafford Loans are generally reserved for borrowers from this Independent Students category.

To change your status from eligibility for a subsidized loan from an initial eligibility for only an unsubsidized loan.

Although a student may initially not qualify for a subsidized loan because of his lesser need in virtue of his part time work or other income, if he now quits his work / employment, he can fill a fresh application form showing his changed financial status and the new need for additional financial aid which may qualify him for a subsidized loan on the second occasion.

If this succeeds, it would make a very big difference to your total cost ultimately payable as an unsubsidized loan ends up very much costlier than a subsidized loan to repay, for obvious reasons.

Students may defer interest payments until graduation or up to when school attendance ends. When repayments start, a student may find himself owing anything between $ 20,000 – $ 100,000 or even more. Loan Repayment re-scheduling is not always negotiable and Stafford Loans are not dischargeable through bankruptcy.

(c) PLUS Loans (Parent Loan Undergraduate Students).

Parents do not have to show financial need to apply. The only federal loan where a credit check is required (although not a full scale check), however, parents should have not have had any adverse credit experience / records of default or bankruptcy; interest rate is currently fixed at 8.5%. This type of loan is disbursed to parents of undergrad dependent children who are enrolled in school at least halftime. (independent children are not eligible). Can borrow up to total cost of entire education of a dependent child undergraduate less: any grants, scholarships received. Repayments start after 60 – 90 days from the full disbursement of the loan; or after the student graduates.

3. Private Loans

These are also known as Alternative Education Loans and are offered by private lenders. There are no federal forms to be filled and these loans are not need based. Eligibility will depend on a good credit score. The rate of interest is (obviously) higher than in the case of federal loans and variable. Maximum amount that can be borrowed as well as a reduction in the interest rate are dependent on how good your credit score is. If your credit score is not good enough for the lender, to service your maximum requirements, getting a cosigner of high credit standing to support your application may achieve those extra benefits for you. These loans are generally taken as a supplement to federal loans to bridge the gap between the borrower’s actual requirement of financial aid and the limited amount that can be borrowed under federal loans programs; or when they need more flexible repayment options.

4. Conclusion:

We have given above concise and yet sufficient details in order to get an all round basic idea of all types of student loans available for the funding of educational programs. We have not tried to overload this article with comprehensive details and facts pertaining to these loans since we have already posted 2 separate and more comprehensive articles on Federal Loans and Private Loans under the captions of Federal Student Loans and Private Student Loans respectively.

We recommend the said two articles for those desirous of obtaining more details on eligibility, features, repayments etc., and a deeper understanding of the advantages / disadvantages and other implications pertaining to all classes of Student Loans.

All About Federal Student Loans

Federal student loans are a great way for students to provide financial assistance for their education. Federal student loans are often considered to be safe and secure mode of financial assistance. These federal loans have many benefits and is available at both undergraduate and graduate students. Many countries, including Australia, USA, UK, India and other countries providing the loans federal student financial assistance or welfare programs for students in schools or higher education.

Federal student loans generally have lower interest rates, many mortgage options with flexible payment options and the loan assistance to students seeking funding for education. For most cases, a federal student loan can be a very economical for higher education. There are websites like federal student finance that lists all aspects of federal student loans and therefore are useful for students to get all the useful information they need student loans or financial assistance.

Types of Federal Student Loans

There are two types of student loans, which are federal loans and private student mortgages. Some of these loans are for parents of students for their financial needs. Each of these types of loans are aimed at different people and depends on several factors, such as region or courses taken. The types of federal student loans are –

Federal Stafford

These loans are granted by the federal government or any third-party educational organization. These loans are given on the student’s financial need and may be issued by a bank or credit union or any of the government offices. They have excellent payment options and so the student can study at home without having to worry about financial problems. Stafford Loans can be subsidized those who do not pay interest until the time of leaving the college / school or who may be eligible where they have to pay interest on the loan amount from the time they are disbursed.

Federal PLUS

These loans are given to parents whose children are conducting their training courses at their respective schools or colleges. The loan, the more you give on the basis of credit history or rating and the cost of attendance. The Federal PLUS Loan has a low interest rate and easy repayment options have payment and usually begins within 60 to 90 days after disbursement of the loan.

Federal Perkins

These loans are usually granted to students with high financial need and also gives bright and deserving students. These loans have very low interest rate payment options with good and easy. A financial adviser can tell you if you qualify for a federal Perkins loan or not you can check for a Federal Perkins Loan. But anyone who is not in case of default in payment of federal Perkins loans, as you may damage his / her credit rating seriously. Federal Perkins Loan is determined by factors such as time of application, the level of funding and the funding level of the school / college.

Rates of federal SL Interest

The interest rate on federal loans are lower compared to private student loans are interest rate is usually fixed. Interest rates of different types of federal mortgage, like Stafford or Perkins credit is different. Such as interest rate Federal Perkins Credit is smaller than other types of loans, but it is difficult to obtain. They have many benefits such as easy payment options and a longer holiday redemption and payment in installments that can be subsidized or unsubsidized.

Benefits of Federal SL Federal student loans have many advantages over private mortgages or otherwise. Federal mortgage can be consolidated with other types of loans to one loan that would be a single interest rate and the student will pay the single consolidated loan. It reduces the hassles of managing various loans and the payment of different types of loans. The federal loan consolidation is very useful for students and parents with many of the loans. Some of the benefits and advantages of federal student loans is given below.

They have low interest rates and fixed.

May be deferred in some cases and can also be forgiven under certain circumstances.

Insurance plans are free.

They have easy monthly payment options and also have plans to grant or subsidy.

No extra charge for prepayment with easy payment options.

They allow debt cancellation under certain conditions.

What Is the Student Loan Consolidation Rate

The student loan consolidation is the merging of several student loans, and is done to save money on interest and for the convenience of one payment instead of several. There are plenty of things you should know about student loan consolidation, and this site provides the information you need to make a decision.

Consolidation Loan – Information
It is very likely that if you went to college is likely to stay with some kind of student loan debt. Each year, borrow, this is a new and unique loan that helps pay for your tuition and living expenses. When all is said and done, however, one of the best ways to save money is through student loan consolidation. In a student loan consolidation you get a loan paid in full.

The student loan consolidation is a mystery to many college students and graduates. The truth is, however, the consolidation loan can save you much money. In addition, you can pay off your debt faster so that your college years are not chasing you in your retirement years. What a relief loan consolidation provides students.

There are many ways you can get a consolidation loan. You can get federal loans, a bank or a private lender, but no matter what you choose to do so; consolidation will have a big effect on getting out of college under their debt. The idea is that it takes only one payment per month, so you can pay your debt off faster and with lower monthly payments than you think normally.

Loan consolidation current students
It is a fact that almost half of all college students graduate with a degree of student loan debt. The average debt of $ 20,000 is focused on. That means an entire population of young people with serious debt and no education on how to deal with it. Most do not know, but the truth is that many of these students are met to consolidate loans and at school.

Despite what many believe, student loan consolidation does not have to wait until after college. In fact, there are many benefits that have been consolidating while you are still in school. Consolidating student loans while in school can lessen the debt before you even start to pay debts. That, however, is only the beginning.

Another advantage of the consolidation of student loan debt while still in school is that you can avoid any increases in interest. In July 2006, interest rates for federal student loans rose sharply. There is nothing that prevents this kind of tours that take place once again. The sooner your debt is consolidated and locked, the less likely victim of a rapid rate of rise.

As with anything, make sure that consolidating student loan debt before you graduate will work for your specific situation. In most cases, however, is a good financial base and move forward. Lightening your debt before he was even paying it is a great benefit. Indeed, it can be the difference in paying their loans off in 10 years or 30 years.

Benefit Credit
Consolidating your student loan debt can do more than just reduce your long-term debt. The fact is that consolidation could help you increase your credit score during the loan. This, in turn, will help you buy a better car, get the house you want, or end up with a lower rate credit card. But how can a debt consolidation student loan can help you increase your credit? Consider some of the measures used by credit rating agencies reporting.

First, further opening the accounts with the lowest score will be, in general. Throughout his student life, which will be held until 8 loans to pay for their education. Each of these is shown as a separate account with its own interest payments and principal. By consolidating, you close the accounts to one account. So instead of 8 open accounts, you have one. This right will not help you qualify.

Second, you will have lower payments after you have consolidated your student loans. When the number of agencies reporting your credit score, they do looking at their minimum monthly payment. Instead of having several payments per month for your student loans, you have a payment that is less than the sum of the payments of age. Again, consolidation helps your score.

As a final point, that improving your debt to credit rationing. When your score is figured, the presentation of reports have companies check your debt to available credit test versus credit used. When you have more credit available, but less used (like when you consolidate student loan debt) after the case of a higher score. So, if for no other reason, consider consolidating to help your credit score.

Beware of traps when you make loan consolidation
As we approach the end of his college career, you have undoubtedly received a number of flyers, mail and e-mail about consolidating your loans. Each company has any reason you should go to them for their consolidation. However, you should be aware that sometimes there are many catches all those promises. Knowledge of the catch can help you prepare to make a wise decision on your consolidation loan. Do not drop the first consolidation of trading that falls into your lap. Carefully consider the options that are delivered to you.

A bonus can be offered is common to all discounts. They will tell you that if you make a series of payments on time, you will receive a discount. The only problem is that to maintain the discount, you have to make timely payments for the loan after that. That may have up to 20 years. A delay in the payment in one day during that time and “discount” is gone.

Another way to get caught in a plus is when you receive the offer of an all in one building. In this loan, the company offers to take in all of its debt, including credit cards, car loans, and any other debt you have. It is tempting to have everything wrapped into one loan, but lose the ability to defer its predecessor or student loans. The loan will no longer be protected as a student loan.

As a final point, be careful with changing your email address or moving. One or two letters misdirected, or worse, the wrong orientation of emails and a lender can make you pay the price. You could lose a discount or paid excessive fees. Therefore, it is unaware of any company that offers strictly to work with you via email.

Know what you get when it comes to consolidation loans
It is important to be familiar with what they are entitled under the Higher Education Act. There are certain advantages for a federal student loan and consolidating it. Note that many lenders offer special advantages consolidation as these that are giving away. They are, in fact, offers to do. Consider some of the most common.

At the same time if you got a letter advertising the beauty is that a company is willing to offer a fixed rate? If you have, not surprisingly. In fact, everyone should offer a fixed rate under the Higher Education Act. This is not a bonus, just what you expect. Do not drop the line that are offering more than they deserve.

Another you might notice is that there will be a credit check. Again, this is not only common but also necessary. All companies that work with the student loan consolidation have to do without a credit check. Knowing what a company is obliged to offer you help in determining if the institution is actually offering a bargain or are misleading, you may believe you are getting a real bargain, more than are required to receive by law.

As a final point, you should never have prepayment penalties. No matter what the company advertises that all their loans without prepayment penalties consolidate. This is nothing special. When you are seeking privileges, then just make sure you are offering something really special.

Myths about consolidation loans
As with any financial matter, there are a lot of misinformation floating around the student loan consolidation. These little myths often keep people from consolidation when, in fact, is best for them. By taking a look at some of the most common myths, you will be able to understand what is true and what is not there.

It is absolutely certain that you will lose your eligibility deferment if consolidating your student loans. By consolidating, in fact, to keep the core deferments can be a great help pay part of the time. Deferrals can be made because in school, go to graduate school, economic hardship, unemployment and to name a few.

Consolidating your student loan is not like this refinancing the house necessarily. Some people worry that if they consolidated from over payments and interest and will end up paying more in the long run. That’s not true. On the one hand, you can pay early with no penalty. Second, get a better rate and can repay all loans under which a fee. The consolidation, if anything, reduce the term loan when it’s all said and done.

As a last point, it is easy to think that consolidation is for those who do not know what they are doing with their loans. It is unclear whether this idea comes from, but is so common that many believe it is and the avoidance of consolidation. The truth is that consolidating your student loans, in most cases, a sound financial move. You save money and reduce the loan period. It’s that simple.

Loan consolidation, as do
The process of getting your student loans consolidated is surprisingly easy. Once you have determined that you use for your consolidation application is only about a page long. Even more exciting is that there are several ways to fill the requests. Take a look at the various options available to you so you can decide which way works best for you.

One option is, of course, do so in person. You can always go to the bank or financial institution that is to consolidate your loan and take care of it. Fill, sign, and he did and in his way. The lender will review your request and contact you with your decision. Whatever, if they live nearby?

Surprisingly, you can complete your application over the phone. It is not really fill you on the phone, but the introduction of information you can go ahead and lock types for consolidation. Once you have done this, it will likely be sent by email or documents for you to finish complete, sign and send back in.

Third, at this time is not surprising that you can complete your application consolidation loan over the Internet. Many lenders have secure websites with the application there to fill. Once they do fit, you get a copy, and all the care within days.

Find your lender
Obviously, before it can consolidate, you need to find a lender with which to organize their consolidation. Fortunately, there is much competition out there, which means two things. This means that companies are easy to find and they are all willing to compete for your business.

The first place to look may be just around the corner or in your mailbox. As we approach the end of school or after the change, about every lender will send you a flyer, email, brochures, catalogs or information about the consolidation of their packages. There is nothing wrong with looking through these free brochures. Many times you will find a good package that way.

Another option, of course, is to talk to your school’s financial aid office. Someone can help you find what you need. What’s more, they have had experience in the area to know what to look for and what to avoid.

As a final point, you can watch online. There are many options available and easy to shop that way. Be sure to contact the places in person or by phone, however, before completing paperwork. That way you can be sure that everything is at maximum and more. It’s a good way to avoid online fraud and only those who seek their harvest information and move on.

As you can see, there are many options to find your company to consolidate student loans. Just make sure you always compare and ask questions. In the end, the best consolidation company is giving you what you want.

Problems with your payment?
No matter what you do with the consolidation, it is possible that your student loan debt can become too high. With only ten years to repay, could end up with fairly high payment, especially if you go to graduate school or even add more years to student work. Stop payments can really put a cramp in your financial situation. There is an answer, however. If loans and payments are too unbearable, you can always expand. You can take the loan and stretch over years in many cases.

Although the standard is 10, your consolidation loan can, in most cases, taken out much longer. You can stretch to 15, 20 or even 30 years. You will earn more interest that way, but with a lower monthly payment, you will have more capital available with which to live your life. You have to decide if you are willing to pay more in interest to make your finances more manageable.

Think of it like this. Would you rather own a home and a new car while paying a little more interest, or if you do not pay their loans off in 10 years, but years pass, in a small apartment with a bad car and not rent available? Most prefer the former over the latter. Therefore, there is no shame in extending the loan if that is what we do.