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Personal Finance

Student loan – Basic info

With the increasing cost of attending college these days, student loan is a valuable resource. If you did not start saving for college early, student loans can help you fulfill your dream of attending college.

Sure it would be great to get financial grants and scholarships to pay off your tuitions. These should be the first resource you look into, as you do not have to pay them back. However when these fall short of the tuition amount, you can apply for a student loan.

To apply for financial aid, you first have to fill out the Free Application for Federal Student Aid (FAFSA). This form will be used to review your family’s income and expenses to determine the amount of federal aid and student loans you are entitled to.

The main federal student loan programs are:

  • Perkins Loan
  • Stafford Loan
  • PLUS Loan

Different student loans have different eligibility requirements. The loans you apply for should depend on your situation, such as whether you are a US citizen or not and whether you are a full-time or part-time undergraduate or graduate student.

Stafford loans are controlled by the government and are a popular source for funding of college education. Subsidized federal loans are need based and the government subsidizes the interest while the borrower is in school and through a grace period after that. Unsubsidized Stafford loans are not need-based and therefore the student is responsible for the interest payments from the time the loan is discharged. These student loans do not require a credit check and so it doesn‘t matter if you have bad credit.

Perkins loan is awarded to students on the basis of need. They are low interest student loans and the interest does not start while the student is going to school.

Parents Loan for Undergraduate Students (PLUS) is given to parents of dependent students so they can pay for their child’s education. There might be a credit check required before parents can secure the loan. Interest rates may vary on PLUS loans.

As an alternative source you can look for student loans from non-governmental institutions. While federal loans are the popular choice for students, private lenders can be good resource to cover left over expenses. The Signature student loan is one popular type of alternate loan.

Remember that you will have to pay back your student loan after you graduate. Therefore a student loan is only beneficial if you can use your college education to get a higher paying job and thus slowly pay off your loans.

It is important to handle student loan wisely. Often people are forced to default on their loans. Some people have to drop out of school when they cannot meet their monetary requirements.

If your student loan is putting a great burden on your financial situation, there may be ways to consolidate your student loan and reduce the monthly payments. Student loan consolidation involves taking out one low interest loan to cover all your other student loans. You may need to meet certain requirements to be eligible for consolidation, such as a minimum loan amount.