There’s no such thing as a free lunch and we all want the very best for our children in terms of education. By its very essence the American Dream sees education as the road to fulfillment for any individual who wants to build a good solid future and achieve complete happiness.

But these days education comes at a big price and there’s no getting away from the fact, ‘debt’ is part of this. OK you could also argue it could be looked upon as a character building process for the student, and maybe it is. But always remember the debt has to be paid back in time.

Unless you’re very fortunate many people can’t meet all the fees up front and so they need to get some form of student loan. This in itself can be a bit of a minefield as there are quite a few available. You’ll need the loan most applicable to your own situation. By the end of this article we hope to have enlightened you further and maybe even helped you choose which is best for the student in your home!

Federal Student Loans

These loans are backed as the name suggests by the Federal Government and include many benefits like fixed interest rates and income-based repayment plans. This should really be your very first option and you don’t need to get a credit check for most of these loans except for PLUS loans.

The U.S. Department of Education will give Direct PLUS Loans to eligible borrowers through schools participating in the Direct Loan Program.

These excellent Federal loans can also help you establish a good credit record in time. In most cases You won’t even need a co-signer and the great thing is you won’t have to start repaying your federal student loans until you graduate, leave school, or change your enrollment status to less than half-time.

It means you can get through school without too many worries and concentrate fully on your studies.There are a number of repayment plans, including an option to tie your monthly payment to your eventual income. In order to get a student loan you must first complete the Free Application for Federal Student Aid (FAFSASM). Again there’s plenty of information available online, and you can even get professional help filling them in.

A Word on Student Loans without Co-signer

The good news is because federal student loans are not based on any form of credit, they will never need you to provide a co-signer, or submit to a credit check. So you can apply for this type of aid without a credit history, a job, references, or personal income of any kind and still qualify without any problems.

Student Loan Consolidation

A Direct Consolidation Loan enables the student to combine a number of these loans into one solitary loan. This means a single monthly payment is required instead of multiple payments. Hopefully a single loan for students will suffice? But take the very best advice first!

BUT BEFORE YOU CONSOLIDATE STUDENT LOANS THINK THE PROCESS THROUGH VERY CAREFULLY!

Take time to view this:
studentaid.ed.gov/redirects/students-gov

Loans made through what we call the Federal Perkins Loan Program, often called Perkins Loans, are low-interest (5 per cent) federal student loans for undergraduate and graduate students who are in the greatest and exceptional financial need. The idea is to give those students even from the poorest families the chance to enhance their education!

Private Student Loans

These are just like taking out a personal loan from your local bank for anything else in life and some people take out a private loan on top of the government backed scheme. The only thing is these can have variable interest rates, some even greater than 18%.

And this is where some families get themselves into trouble. A variable rate may substantially increase the total amount you repay, so you must shop around for the lowest rate. Even talk to your own bank who may be able to help more. This can save you an awful lot of money in the long term. You’ll probably need an established credit history.

The cost of this loan will depend on your credit score and other factors. You’ll also need to start re-paying when you’re still at school or college too so you’ll need to be fully prepared for this! And it’s important to point out they cannot be consolidated into a Direct Consolidation Loan, and you’ll need a cos-signer.

ITS VERY IMPORTANT TAKE A LOOK AT THIS:

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The National Student Loan Database

The National Student Loan Database is in fact a massive and impressive set of records kept by the Department of Education containing the details of virtually every federal student loan disbursed by the government. This is also to protect identity and safeguard students and their families.

So you can have the best possible peace of mind. Every time a student takes out a loan backed by the Government the details of loan and the borrower payments on it are sent to the Department of Education National Student Loan Database.

The whole idea behind this national student loan data system is students don’t have to contact their school financial aid office or loan provider as they can get all the information they need directly from the NSLD. They can deal with any problems both quickly and efficiently and of course they are vastly experienced and understanding.

Student Loan Calculator

This is a well thought out tool for calculating the monthly payments taking into account both the interest rate and the principal loan amount for private and federal loans. These clever calculators should also be used when comparing the various private loan programs to decide on which one is best for you and there are a whole host of them on the internet.

By plugging in values like the amount of loan required, repayment time, annual interest rate, and payments per year (usually 12), you can arrive at a ball park figure close to what will be your minimum monthly payment. Planning ahead can be all important and you can be clear in your mind you won’t get into trouble in the future.

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The future of the student always has to be paramount here. The problem is families or individuals can still get into a lot of trouble because they’ve either taken out the wrong loan or got in above their heads in some way. Loans backed by the Government should always be looked at first before going down any other road.

After all, this is what they were devised for and you should take full advantage of them. Private loans should be taken out with caution, and there are other alternatives available, so whatever you do don’t go rushing into things. Plan everything way down the line.

Take the very best advice!

To become part of the ‘American Dream’ it seems a first rate college education is a necessity. But sadly it’s an expensive necessity as tuition fees charged by universities and private colleges can reach more than $60,000 each year. Thankfully there are various student loan options available, and its worth noting tuition fees at public universities are generally lower!

What Type of Student Loans are Available?

There are two types of student loan for undergraduates:

Federal Loans

This should be the first port of call for students as these are made by the U.S. Government directly. There are also federal loans made by other lenders including banks, and these are guaranteed by the Government. The interest on this type of loan is set at a fixed rate by the Government. All colleges and Universities should make this clear to students. Stay clear of those lenders who don’t carry government guarantees!

The ‘Stafford Loan’ of which there are two types is the most popular as these are available to everyone regardless of financial need. You can get them directly from the Government or through a lender. For those who can show sufficient financial need, the government will pay the interest on “subsidized” Stafford loans for individuals for as long as they stay enrolled at college. The flip side is loans accumulate interest while a student is in school. In this case the student can either pay the interest when it’s due or let it be added to the overall balance

A ‘Perkins Loan’ is available to those students who have need for the greatest financial assistance. ‘Federal Pell’ grants are given to students from low-income families. Parents can take out federal loans. These ‘Parental Loans’ are also known as ‘Plus Loans’. Check out ‘The Federal Education department’ Interest rates can range from five through to eight per cent so make sure you shop around!

There are lenders out there who will offer discounts on the loan after for example you’ve made a certain amount of consecutive payments on time.

The government sets limits on how much money students can borrow under each loan program. This ranges from $5,500 in the first year of study up to $7,500 in later years. The highest amount an undergraduate can borrow from the Stafford loan program is $31,000.

‘Federal Student Loans are also available through the William D. Ford Federal Direct Loan Program.’

In the case of Plus Loans a family can get enough money to cover their full period of attendance, less other financial help they receive. This cost of attendance is set by law and also includes boarding, transport and books.

Private Loans

These are similar to a personal loan you’d get from a bank except interest rates will be higher and will fluctuate over time. Citi student loans are one such example. Underwriting these loans can also be a problem as many students don’t have a credit history. These private student loans however, don’t carry the level of protection you get can from a federal loan. Temporary deferment or forbearance are terms used to explain under various circumstances a borrower won’t have to make payments on the loan.

Look at: how to cope with repayment difficulties for federal loan borrowers.

 
You should know student loans taken out privately are open to special treatment in the rare occurrence a student should go bankrupt. In this case they won’t incur a total debt amounting to more than the cost of attendance. Non co-signer student loans are available for students who have a good credit score, but it’s rare for students not to be given a private loan without a co-signer anyway. Take a look at the websites of both Wells and Citi for more information

Every U.S. student who wants to be considered for financial assistance must fill out the Free Application for Federal Student Aid form or a (FAFSA). Financial aid offices at educational institutions use the FAFSA to work out if you are eligible for grants, loans, and work-study programs. You MUST file one of these forms every year in order to be considered for financial aid. In truth it’s a long form so you’ll need to be patient, but it can also be completed online. The good news is by filling this form in you could save hundreds of dollars in the long run so it’s worth the effort.

For those hoping to go to college there’s a wealth of information on the internet for would be students – check out ‘SimpleTuition’ and ‘Graduate Leverage’. Some of these sites are paid referral fees by the lenders themselves so make sure you do plenty of research.

For more information it would be a good move to seek out The Institute for College Access and Success (www.ticas.org).

Everyone should be able to enjoy a good further education and there are student loans to suit every background. Don’t miss out – check out!!