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Factors to Consider Before Applying for a Student Loan

Different Student Loans Programs

In developed world today the job market is very competitive and going to college or university increases a person’s chances to gain better employment opportunities after graduating.  A large number of students decide to take a student loan in order to invest in their studies. There are numerous student loans programs nowadays that are intended to financially assist students to pay for their academic expenses. Student loans repayment generally begins from six to twelve months after a student leaves school. Different student loan plans offer diverse terms and conditions as well as specific requirements.  Here is some useful information to figure it out what are the best student loan plans accessible today and how to successfully manage with loan repayment. Some of the most popular available student loan options are Federal Stafford Loans, Federal Student Loans, Federal Plus Loans, Federal Perkins Loans and Private Student Loans.

The Best Student Loans

Federal Stafford Loans

Federal Stafford Loans are fixed-rate student loans for undergraduate and graduate students attending college at least on half-time basis.

Federal Stafford Loans include following types of plans:

  • Direct Subsidized Loans for students in financial need, free of interest charge during the time in school and during grace period and deferment periods.
  • Direct Unsubsidized Loans which are not based on financial need. You can choose to pay the interest while you are in school and during grace and deferment periods or to let it to be added to the main amount of your loan, which will, of course increase the total amount you have to pay off.

The major benefits of this loan plan are low fixed interest rate of 3.40%, increased borrowing limit- up to $20,500 per year and exemption of repayment while student is enrolled in school – repayment begins six to twelve months after graduation. To qualify for Federal Stafford loan program, you must be a U.S. citizen or national, a U.S. permanent resident or eligible non-resident attending a school that participates in Federal Family Education Loan Program and be enrolled in school at least half-time. Federal Stafford borrowers can qualify for the teacher loan forgiveness program if they teach in designated “low-income” schools.

Direct Federal Student Loans

Direct Federal Student Loans are low-interest loans for students. The lender is the Department of education of the U.S.A. With this loan program you borrow money directly from the federal government and have online access to your direct loan account. You are also able to choose from numerous repayment plans. Moreover, you can switch repayment plan if you want. Federal loan program offers the following types of loans:

  • Subsidized for students with proven financial need. These loans are with no interest rate while student is in school, as well as during the grace period and deferment periods.
  • Unsubsidized which are not based on financial need, with interest of 6.8% charged during all periods, including time in school, grace and deferment periods.
  • PLUS unsubsidized loans for the parents of dependent students and for graduate and professional students. Interest is charged during all periods. To qualify for this loan, the parent borrower must be the biological or adoptive parent of the student; must not have a bad credit history; the student must be enrolled at least half-time at a school participating in the Direct Loan Program; the parent and student must be U.S. citizens or eligible noncitizens.

Federal Perkins Loans

Federal Perkins Loan program provides fixed low-interest loans with interest rate of 5% for students who are attending one of participating postsecondary institutions. Students are required to fill FAFSA or Free Application for Federal Student Aid and a Perkins promissory note in order to receive the loan. Duration of repayment period is ten years and the grace period is nine months.

Private Student Loans

Private Student Loans can either complement or replace federal loans such as Stafford loans, Federal Plus loans and Perkins loans. This loan plan is good borrowing option for students who either cannot or don’t want to borrow the money from government programs. Take into account, that when you choose to acquire the Private student loan interest rates can be to some extent higher than with other loan options.

Important To Know

Before taking an academic loan it is very important to be familiar with some essential facts about this type of credit. The much you know about the loan you are going to get involved with, the greater are chances to choose the best student borrowing plan and to repay it easier when the time comes. Here are some useful guidelines to help you with your student loan.

  • In case you decide to attain a student loan online, make sure that the lender you are dealing with is legal, since there are many Internet frauds related to student loans. You can do it by checking the company’s homepage for an address or a landline telephone or, even better, check it with the Better Business Bureau (BBB). In addition, you should search for any reviews available online.
  • Never bond yourself to just one loan plan. Get together a few of loan proposals, compare their terms and conditions and choose one that meets your needs the best.
  • Electronic banking services are very convenient because they enable you to access your money quickly and in the easiest way. Get information on whether or not your eventual lender takes part in electronic banking process and whether you will be able to receive your money to your bank account electronically which will let you avoid a hassle with loans sent via paper checks mailed to your college, which is something that some lenders do.
  • Before applying, make sure that you are aware of all parties involved in the loan process. It may be the case that your potential  lender  uses a service company to take care of the administration of your student loan, which means that taking a loan from that lender may involve paying off the money back to the service as well.

What Are Your Options?

Student loans are created to help students to invest in their education; nevertheless, it can cause numerous troubles if they are not paid in the right way. To avoid going into a huge debt and financial crises, you must be aware of some important issues before applying for a student loan. We strongly recommend to students who intend to borrow academic loan to get as many information as they can on most important questions related to student loans. First, you need to ask yourself a few vital questions.

Can I Afford to Get Involved With Student Loan?

Always be aware of the fact that you are going to make monthly repayments of your student debt, so you need to be sure that you have enough money and that you will be able to make these payments. The best way to secure yourself is to have some savings to cover a few repayments in case the some financial problems occur, e.g. you lose your job or have some unexpected expenses. If your monthly payment overcomes your budget, you will go into the risk of increasing your debts by for instance, using you credit cards to repay the student loan.

Am I prepared for a long-term debt?

You should take into consideration that you are going to be involved with loans for a long period of time and ask yourself will you be capable to handle this. Think about your loan and your options carefully before you apply for it.

Am I informed about the policies or terms of the lender properly?

Never sign any contract without being one hundred percent sure that you understand all the terms and conditions. You have to choose a good plan that will help you to handle your loans. Try to find the best lender who will offer you the best borrowing conditions.

Here are some things you should pay attention to when looking for the best lender.

  •  Focus on Interest Rates

This is something you should take into consideration at first place. Interest rates could significantly vary and you should pay attention to interest rates and the lengths of the repayment offered by diverse lenders and choose borrowing deal very carefully. Furthermore, you should consider that the lower interest rates have longer terms.

  •  Check for Unseen Fees

Always read the contract carefully before signing it. Don’t hesitate to ask questions about anything that seems confusing because it is something that will help you to uncover hidden charges. Ask for help someone who is familiar with this matter to be sure you are making the right decision.

  •  Check Different Rates

There are two kinds of rates, the flexible rate and the fixed rate. The first one changes depending on the situation of the financial system. Quite the opposite, the fixed rate remains the same for the all repaying period, which is good because you know exact amount you are going to pay.

Student loans are helping a large number of students today to gain academic education and invest in their professional future. Although they are undoubtedly helpful, you should be careful and aware of their downsides if aren’t used properly. So, if you find that you need a student loan, consider all the above mentioned factors before closing a deal with your lender.

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