Apply for college loan
There are many types of expenses related to different types of courses offered by colleges. For meeting these expenses, a person has to take college loan, categorized under student loans. These loans are provided to students as well as to their parents. In present times, college loans have become very important. In United States, about 54% of the education expenses are met by means of student aid provided by different institutions and government departments. Before taking any type of college loan, it is required that first a student decides about the type of loan required.
There are basically two types of loans available. These are loans based on the financial need and loans not based on financial needs. Need based loans are provided by the federal government under its various programs and are characterized by low interest rates, delayed repayment ability and in-school interest subsidy. A person can get the Stafford loans at 6.8% fixed and plus loans at fixed rate of 8.5%. These loans are not repaid until a person has completed the course. So far the non-need based loans are concerned, these are provided to those families that are unable to make proper savings from their income to fund the education expenses. These loans are characterized by higher interest rates, no in-school subsidy and immediate principal repayment in some cases. A student should understand various aspects of above two types of loans and then apply accordingly. In United States, there are basically 4 types of loans that are included in the latter category. These are unsubsidized Stafford loans, plus loans that are provided to parents, Grad Plus loans that are meant for the graduate students and private loans offered by various financial institutions. Sometimes, private loans are also called as alternative loans.
If a student decides to apply for the need based loans, there are basically 4 options available to him. These are the Perkins loans, subsidized Stafford loans, unsubsidized :Stafford loans, Grad Plus Loans. In Perkins loans, loan amount is provided to student with highest needs. Interest rate is low; sometimes 5% in some cases and no payments have to be made while studying. Subsidized Staffordp loans are fixed rate loans in which federal government pay the interest each year while the person is studying. Unsubsidized Stafford loans are provided without any assessment of financial need and are meant for paying the family share of education expenses. There is no interest payment made by federal government during the course. Grad Plus Loans are provided to graduate students and they are also not related to the need of person. Normally, a person is able to get the amount equal to the total education cost minus any previous aid received.
A person can apply for the loan as per his needs. However, there are some other types of options present for fulfilling financial requirements. These include college sponsored loans, parent loans and Federal Plus loans. After a student has gathered information about all the types of loans available, the next important thing for applying loan is to select the right type of loan. In fact, if it is said that this is the most important aspect of college loan applying, it would not be incorrect.
Comparing different types of loans
A student should compare the different types of loan options available on the basis of some parameters. These parameters help in selecting the best loan program available. Experts have recommended four key factors on which all the loan options available should be compared. These are interest rates, loan fees, repayment options and whether loans are subsidized or not. A person should try to go for that loan option which has the lowest interest rate. This will help him in repaying the loan easily. If a student is able to get a subsidized loan, he should always go for these loans. This is because federal government would be making interest payments while the person is studying. This makes the loan less expensive than others. Loan fess is the other criteria that should be looked for while applying for any type of college loan. These fees are charged under the name of processing fee and origination fee. Sometimes these fees can cost much to a person. Repayment plan is the last key factor that has to be looked for while applying for a college loan. That loan option should be selected which has the desirable repayment method. For example, there are some types of college loans where a person is given benefits for timely repayment, like interest rate reduction. After taking all the 4 key factors into consideration, a student should make out which is the cheapest loan available. Perkins loans are the cheapest loans around, followed by subsidized or Staffordplace> loans, unsubsidized loans and private loans. Private loans carry the maximum cost of loan and thus, should be resorted as last option. It is also advised here that a student should see for the special loan programs provided by college and other private sources.
Other aspects
For getting different types of loans provided by the federal government, a person is required to fill a special form. This is called as FAFSA or Free Application for Federal Student Aid. It is advised that a person should provide his information about the needs, as loan becomes less expensive in such cases. If a person borrows outside the need mentioned, loan becomes more expensive. Even for getting approval for the unsubsidized loan, FAFSA has to be filled. Many experts feel that a student should apply for that much loan amount which is really necessary and can be repaid easily. It is not necessary that a student borrows all the money shown in the award letter. Loan amount can be reduced by way of increased savings, working as a part time employee and getting the scholarships if eligible. By means of student loan repayment calculator, repayment amount can be arrived at and can be compared with the future income. A student should take the estimated salary at conservative standards.
Other Articles
