STUDENT LOANS
So you’ve asked mom and dad, grandma, grandpa, and every distant relative you can think of for some cash and nothing’s doing. But you are determined to get your degree. So how are you going to pay the for the often overwhelming costs associated with obtaining your degree? Student loans are the most effective way of obtaining the resources necessary. Student loans come in numerous forms and we will proceed to go through each type.
There are two main types of loans – federal loans and private loans, both offering advantages and disadvantages over the other.
Federal Loans
Federal student loans can be either subsidized or unsubsidized.
Subsidized student loans enable a student to take a loan while deferring interest payments until after graduation. These are need based awards and are long-term. They carry a low interest rate and additionally they often enable a student to defer payments if the need arises even after graduation depending on individual circumstances. Federal student aid is generally awarded based on the student’s as well as, in most cases, the family’s income and resources. When possible, this would be the best option as interest rates are often quite low and repayment options are flexible, particularly during times that it is more difficult to repay student loans.
Unsubsidized student loans differ from subsidized loans in that unsubsidized loans are generally available to anyone who is in need of them. That being said, the interest on unsubsidized loans begins to accrue immediately, though in some cases there are deferment options. While these loans also carry a low interest rate, they may not be as low as the rates for the subsidized loans depending on how the loans are obtained.
Private Loans
If you have exhausted all of your federal loan options, private loans are a solution to close the gap that exists between your resources and federal aid and the amount you will need to pay for tuition and expenses. Private loans can be used to pay for educational expenses such as tuition, housing, and textbooks, but also additional costs such as transportation. Private loans are generally easy to obtain and there are options for those with bad credit. However, the interest rates are higher than federal loans but often times make it possible for students to attend university when it otherwise may not have been possible. Private student loans can be obtained any time giving more flexibility to the borrower. Private student loans do require a credit check however. It is a good idea, when possible, to have a co-signer, even if it is not required because it will improve your chances of being approved for the loan as well as reducing the interest rate in many cases. Additionally, deferment options are available for private loans which can reduce the burden of having significant balances and enabling students to focus on their studies. Many banks offer private loans for students and often make it very easy for students to apply and receive loans without being bogged down in paperwork.