By: Gaurav Bhola, MSM, Managing EditorYou got into a college or university, and you need financing options. What do you do? The choices seem limited as full scholarships, grants, or work-study programs may not be an option available to you, so you are left to choose a student loan program that is most beneficial and suitable to your needs. There are two types of loan programs, federal and private that can help finance your higher education.
Federal Loans
These college loans are given out based on the calculated need on an applicant's Free Application for Federal Student Aid application (FAFSA). A Perkins Loan is reserved for students with extreme financial hardships. Another option for school students is the Stafford loan. Students need to meet certain financial needs criteria; the financial need doesn’t have to be as extreme as qualifications for a Perkins loan. One of the best features of the subsidized Stafford loan is that the government defers payment for the loan until after graduation. Additionally, the government will pay your interest on the loan while you are in school.
There is an unsubsidized version of a Stafford loan that is available as well. This version of the loan is available to all school students, irrespective of need. Unlike the subsidized Stafford loan, the interest is paid by you right away. Another federal loan is the PLUS loan for parents with a fixed interest rate.
The application process for federal loans is very time consuming and tedious compared to private loans. The inconvenience of applying for a federal loan leads many students and their families to go in for private student loans.
Private Loans
Private student loans provide students an alternative to federal loans. The recent student loan scandal in which it was discovered that college officials were not impartial when referring students and their families to student loans outlines the borrowers’ need to be vigilant. Herein, when applying for a non-governmental loan, students always ask the financial aid office if the recommended loan is the one with the lowest interest. Make sure you ask the critical questions before applying for the loan. The same care should be taken when applying for a competitive student loan online.
According to statistics issued by the College Board, private loans accounted for 24% of total education loans in 2006-07, becoming a critical component of financing a college education. The private school loan lenders have grown over the years due the competitive nature of the marketplace. It is this healthy competition that fosters innovative college financing solutions for students and their parents.
Moreover, after graduation students can perform debt consolidation or loan consolidation. A student can consolidate various loans into one easy loan payment offering greater flexibility in personal finances.
