Education For Success
College Resource Center Article
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Types of Student Loans
from: Kyle BesserUsing student loans to help pay for college is usually a good idea as an investment in your future. Student loans are generally a good deal. You get below-market interest rates, and you also get a $2,500 federal tax credit on interest paid over any period of time. After you graduate, you will have a higher paying career.
The federal government education loan program of $50 billion provides the largest percentage of student loans. Other student loans may come direct from colleges, private lenders or state governments. One of the key advantages to a federal government education loan is that it is guaranteed. That means you don't need collateral, and the federal government education loan terms are usually better than a typical lender might offer.
Federal Stafford Loans
For undergraduate or graduate students, Federal Stafford loans are a popular and cost effective source of student loans. U.S. Department of Education Stafford Loans provide low-interest, government guaranteed funds. U.S. Department of Education Stafford Loans come in two types: subsidized Federal Stafford loans or unsubsidized Federal Stafford loans. Whether or not you are eligible for a subsidized U.S. Department of Education Stafford Loan depends on family income.
For subsidized loans, the federal government covers the interest up to start of repayment, including interest incurred during the course, in deferment and during the grace period before repayment begins. If you qualify for subsidized, it's a great deal. For unsubsidized loans, the student must pay all interest incurred at all times, although they don't start repaying the actual loan amount until after grace period.
Federal PLUS Loans
Parent Loan for Undergraduate Students (PLUS loans) allows parents to take a low interest loan on their child's behalf. Federal PLUS loans actually allows parents to borrow the total cost of their child's education, minus any grants or other financial aid awarded. All tuition fees, meals, books, transportation, etc. can be included in the loan.
Federal PLUS loans are really a great deal. There are no income or asset requirements. Even poor credit history may be overcome. Repayment is flexible, and can include zero payments for up to 4 years.
The only drawback to the Federal Stafford Loan and Federal PLUS loans is that your school must be approved to participate in these programs. If your school isn't approved for Federal Stafford Loans and Federal PLUS loans, then you have to use other options.
Bank Student Loans
Many banks offer unsubsidized Federal Stafford Loans. You can still get the money you need to attend college, but repayment options are more limited. Some deals offer you an interest rate reduction if you make payments on time.
State Student Loans
Most states offer guaranteed state student loans. Students apply directly to the banks that administer the state student loans program. This is usually a more expensive way to borrow than through Federal Stafford loans.
College Board Extra Credit Loans
College Board Extra Credit loans are administered by your college. College Board Extra Credit loans can be expensive and College Board Extra Credit loans are best used only in an emergency such as your aid is withdrawn.
Other Student Loan Sources
There are a number of other sources that may be worth trying if you have a problem with your first choice lenders. Academic Management Services (AMS) affiliates with approximately 2,000 schools. AMS pays your tuition fees if you repay them in less than a year. College Resource Center also has student loans available. If your parent served in the military, then a military loan should be investigated.
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