All About Student Loans
By A Typical Student
All About College Student LoansCollege education is pretty darn expensive these days. Unless you come from a wealthy family, you will no doubt need to rely upon loans to finance your education. This article seeks to provide you with the information you need about student lending and borrowing so that when the time comes, you can make an informed decision.
Federal LoansFederal Loans should always be your first resort since they are the easiest to get, have the lowest rates, longest terms and in many cases can be deferred or forgiven. Federal loans come in many flavours:
Federal Perkins LoansPerkins loans are funded by the school and are available to undergraduates and graduate students. There are no requirements for the number of courses the student needs to be enrolled in.
The maximum award amount for undergraduates is $4000 a year and $20,000 in total. The maximum award amount for graduate students is $6000 a year and $40,000 in total.
The interest rate is 5% and the student has up to 10 years to pay the back.
Stafford LoansStafford loans come in two forms: Direct and FFEL. Direct Stafford loans are funded by the federal government’s Department of Education and are available through the college’s financial aid department. FFEL Stafford loans are funded by a bank, credit union or other private lender.
Stafford loans are offered to graduates and undergraduates enrolled in at least half-time studies. Eligibility requirements take into consideration the length and cost of the student’s studies and whether he or she is a dependent or independent student.
In many cases Stafford loans can be subsidized, meaning that the government will pay the interest on the while the student is in school, for the first six months after the student leaves school, and while the payments have been deferred. Eligibility for subsidization is dependent on the student’s financial situation and needs.
Unsubsidized loans are available to all students, regardless of their financial situation. However, the student is responsible for all interest incurred on the loan.
Award Amounts under Stafford LoansFrom Federal Student Aid:
“If you're a dependent undergraduate student, each year you can borrow up to
•$2,625 if you're a first-year student enrolled in a program of study that is at least a full academic year.
•$3,500 if you've completed your first year of study and the remainder of your program is at least a full academic year.
•$5,500 if you've completed two years of study and the remainder of your program is at least a full academic year.
If you're an independent undergraduate student or a dependent student whose parents have applied for but were unable to get a PLUS (a parent loan), each year you can borrow up to
•$6,625 if you're a first-year student enrolled in a program of study that is at least a full academic year (no more than $2,625 of this amount may be in subsidized loans)
•$7,500 if you've completed your first year of study and the remainder of your program is at least a full academic year (no more than $3,500 of this amount may be in subsidized loans)
•$10,500 if you've completed two years of study and the remainder of your program is at least a full academic year (no more than $5,500 of this amount may be in subsidized loans)”
The interest rate for both Stafford loans was 5.3% in 2005/2006. FFEL Stafford loans must be repaid within 25 years; Direct Stafford loans must be repaid within 30 years.
PLUS LoansPLUS loans are loans parents can obtain for their undergraduate children enrolled in at least half-time studies. They come in two
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PLUS loans cover the student’s cost of attendance less their other student aid. The interest rate for both PLUS loans was 6.1% in 2005/2006. FFEL PLUS loans must be repaid within 25 years; Direct PLUS loans must be repaid within 30 years.
How to ApplyTo apply for a Stafford or Perkins loan, you will need to complete a Free Application for Federal Student Aid (FAFSA). This can be done online at http://www.fafsa.ed.gov/. You will also need to sign a promissory note that says you agree to pay the back under the terms of the promissory note.
For a Direct PLUS Loan, your parents must complete a Direct PLUS application and promissory note, contained in a single form that you get from your school’s financial aid office.
Private Loans
Private loans are used to cover additional costs not met by federal aid. They are available from schools, banks, credit unions or other private lenders. Eligibility to receive private loans is stricter and in many cases the borrower will require a co-signer. Interest rates on private loans also tend to be higher.
This article was written by StudentBenefitServices, a student consolidation service provider that helps student borrowers consolidate their education loans. For more information about student borrowing and consolidation, visit www.studentbenefitservices.com.
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