Many pursuing a college career find it necessary to take out student loans. However, loans for college students are not as cut and dry as your regular bank loan. Unlike other forms of financial aid like grants or scholarships, student loans have to be paid back at some point. Not only does the total amount borrowed need to be repaid, but it will also need to be repaid with interest. If you don?t know what you are doing, this can be dangerous ground to tread. Just think about it: you will owe your school or lender money for several years after your college education is completed. This can be a scary thought, especially if you are unsure of how the whole student loan process works. 7
A student loan is borrowed money to help pay for higher education. Due to limited availability of grants and scholarships, loans help many in the United states obtain a college degree. In the past, these loans were almost always offered by state or federal governments. Government student loans have limits on the amount of interest that lenders can charge. These loans also include other important protections for borrowers. On the other hand, the government is able to use very aggressive collection tactics, such as seizing portions of Social Security benefits that private creditors are not legally allowed to seize. 22
He was one of 500 students left in the lurch with the April 7 bankruptcy filing of The Education Resources Institute Inc., a Boston nonprofit that guarantees student loans. And his ordeal is only the latest example of chaos in the college loan market. More than 50 firms have abandoned or cut back their federal or private student loan programs this year, unable to raise money in the financial markets. Yesterday, Citigroup, one of the largest private lenders, said it would stop lending at some schools and end its federal loan consolidations. 33
The Education Department recently contacted college financial aid offices and found no instances in which an eligible student was unable to get a federal loan, Education Secretary Margaret Spellings said Friday. In cases in which a lender has stopped participating in the federal student loan program, Spellings said, other lenders have stepped in to provide loans. Spellings made the comments in testimony to the House Education and Labor Committee. 1
A federal student loan allows students and their parents to borrow money to help pay for college through loan programs supported by the federal government. They usually have low interest rates and offer attractive repayment terms, benefits and options. Generally, repayment of a federal loan does not begin until after the student leaves school. Federal student loans can be used to pay school expenses such as tuition and fees, room and board, books, supplies and transportation. 24
There are thousands of educational institutions in the United States, and not all of them are certified under Title IV of the Higher Education Act. This doesn't mean they're not valid educational institutions - not at all. Some schools simply choose not to accept federal funding (and the stringent requirements that come with that decision). Act Private Student Loans are available to students attending any TERI-approved school, including more and more private and non-traditional educational institutions, giving you the freedom to pursue whatever path in life you want to follow. A college education is still the best investment and the best private student loans help make it a reality. 14
The amount of federal money that students can borrow is limited, and those limits haven't kept up with increases in college costs. As a result, some students who attend high-cost schools rely on private loans to pay for expenses not covered by their federal loans. 2
Private student loans are offered by companies that have no federal ties. Unlike the federal loans, which are guaranteed to a certain extent so long as you meet the minimum requirements, private loans are most often based on your (or your parent?s) credit score. Private loans, such as those provided by Bank of America, Wells Fargo or Chase, fill in the gap between the amount received from federal loans, grants and other forms of financial aid. College is expensive and private loans help to make it affordable. 7
Think Financial encourages every student to exhaust their federal student loan options as federal student loans are guaranteed by the government and can be used to pay for school tuition, room and board and other school charges. All college bound students are eligible for Federal Student Loans which are federally-backed and processed in accordance with rules and regulations issued by the United States Department of Education. Think Student Loans help you supplement your federal loans to cover education related expenses. 11
Federal student loans offer borrowers many benefits not typically found in private loans. These include low fixed interest rates, income-based repayment plans, loan forgiveness and deferment options, including deferment of loan payments when a student returns to school. For these reasons, students and parents should always exhaust federal student loan options before considering a private loan. 24
Edward Kennedy, D-Mass., chairman of the Senate education panel, has proposed raising the limits for federal student loans. But previous efforts to raise those limits have failed, and even if Kennedy's effort succeeds, it's unlikely that federal loan limits will be expanded in time to help students who will start college this fall. 1
In the meantime, there are alternatives to private loans. Families that have maxed out on their federal loans should consider a federally guaranteed Parent Loan for Undergraduate Students, or PLUS loan. These loans let parents borrow up to the amount of college costs that aren't covered by the student's financial aid package, at a rate of 8.5%. That's lower than the rate for many private loans, and it's fixed. 1
Once you have completed the financial aid application, your school will notify you with information about the aid for which you are qualified. After considering any scholarships, grants, savings or earnings, you may still have expenses for your education that are not covered. Student loans are typically used for these expenses. You should start by using any federal student loans (such as Perkins, Stafford and PLUS) for which you qualify, as these loans have better terms and lower interest rates. However, many of these loans have borrowing limits, so if your educational expenses are still not covered, you can use a private student loan to cover the rest. Search for a private student loan and compare multiple options here. 43
Undergraduate student loan limits range from $3,500 to $10,500 per year depending on certain factors, including the student's year in college. Graduate students can borrow up to $20,500 each year. Parents can also get federal student loans to help pay the remainder of college costs that are not covered by their children's other financial aid. These are called PLUS loans. In addition, graduate students may obtain PLUS loans to help pay for their own education. 24
Federal student loans like Federal Stafford student loans may have helped plenty of students to go to college but very often families discover that even the maximum student loans amounts fall short of education expenses. Take for example the average cost of a four-year public school being $11,354 and for a private one, $27,516. Most first-year college students can avail of no more than $2,625 in Federal Stafford student loans.
