Why Finance Your Education?
What to Look for in a Student Loan
Types of Student Loans
Stafford loans are provided by the Federal Government and their interest rate is always fixed (meaning it does not change and is what it is) and it is determined by Congress. The government offers both both subsidized and unsubsidized loans. For those that are subsidized, the government pays the interest while you are school. Therefore, the balance when you graduate is the same amount of money you borrowed. However, on those that are unsubsidized, the interest accrues while you are in school and the balance upon graduation will be more than you borrowed initially. If you can make any payments towards your unsubsidized debt while in school you should consider it so that you don't graduate with student debt that has ballooned into something unmanageable.
PLUS loans are another type of student loan offered by the Federal Government. Unlike the Stafford loans, there is no cap on how much money you can borrow in PLUS loans. They used to be exclusively offered to parents, but now students may take out PLUS loans as well. The interest rates on PLUS loans are fixed and determined by Congress. For many years the rates was 7.9%; however, the interest rate for money borrowed after 7/1/2014 is 7.21%.
Federal Perkins loans are available to undergraduate, graduate, and professional students with exceptional financial need. The school is the lender to the students and therefore, Perkins loans are not available at all schools. Funds depend on your financial need and the availability of funds at your school. undergraduate, graduate, and professional students with exceptional financial need. undergraduate, graduate, and professional students with exceptional financial need. If you are an undergraduate student, you may be eligible to receive up to $5,500 a year. The total you can borrow as an undergraduate is $27,500. If you are a graduate or professional student, you may be eligible to receive up to $8,000 per year. The total you can borrow as a graduate student is $60,000, which includes amounts borrowed as an undergraduate. The interest rate is set at 5% and not subject to any interest rate deductions.
Another way to pay for your education is through private loans. Private loan rates are set by the banks that lend the money to students. These interest rates are typically variable and change and vary depending upon the current rate for either LIBOR or Prime. Private loan rates are available online at Finaid.org and Bankrate.com.
Consolidating Student Debt
Student Loan Consolidation
If you have excessive student debt, one thing to consider is consolidating your student loans. Through consolidation, you can lock in an interest rate (if it would otherwise be variable) and extend the length of time you have to pay back your loans. By extending the period of time you have to pay back your debt (typically from 10 years to 25 years), you will lower your monthly payments, which may come in handy when just getting out of school if you have a low paying job and cannot afford the monthly payments. Only federal student loans are eligible for consolidation.
Paying Off Student Debt
Now that you have learned about the different types of student loans and you understand them so that you can finance your education, you next step should be to look into managing your student loans by not getting buried by student debt and paying off your student loans as soon as possible.
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