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!
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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.
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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!