Understand Student Loans and Which is Right for You provided by EduInReview.com
With the economy still struggling, annual tuition increases, and more and more students seeking a college education, taking student loans is becoming a greater reality than ever before. The path to obtaining student loans and other financial assistance for college can be a confusing, twisted maze that can be frustrating and defeating. We can help put you on the straight and narrow toward getting your loans by clarifying the different types of student loans and the best way to get them.
Federal Student Loans
Federal student loans have guaranteed lower interest rates than a private lender and there are no credit checks or collateral required. There are a number of deferment, repayment and consolidation options available after graduation. Subsidized loans will provider a lower interest rate than a Stafford loan.
There are three types of federal student loans that you could be eligible for:
1. FFELP – Federal Family Education Loan Program, which is approved by the government and provided by a privatelender.
2. FDSLP – Federal Direct Student Loan Program is approved and provided by the government.
3. Perkins Loan – This is the best choice for students with the most financial need. This school-based loan places the school in the position of lender. Even better, it comes with an incredibly low interest rate and there are no origination or default fees.
Applying for a federal student loan requires completion of the FAFSA, or Federal Application for Student Aid.
Private Student Loans
These aren’t typically a first choice for parents or students, but rather a back-up plan when other loan options don’t fulfill financial need. These loans are provided by private lenders like banks or credit unions. Completion of the FAFSA is not necessary; instead you’ll complete a traditional loan application and your credit score will be reviewed to determine approval. Interest rates and fees will be based on your credit score.
These loans do not originate with your mom and dad, but rather lenders provide a loan to the parents of college students to help pay tuition and related fees. Known as the PLUS loan (Parent Loan for Undergraduate Students), parents maybe borrow money to cover additional school-related costs. Eligibility is based upon a credit check and it has fixed interest rates that are not need-based.
Graduate and professional students can also apply for a PLUS loan by submitting the FAFSA (not a requirement for parents); although both will have to sign a master promissory note.