Procuring Student Loans

Procuring Student Loans

by Adam Heist

Attending a college or a university is not as simple as it seems. Higher studies are something that involves great expenditure, and frankly speaking, average American needs to stretch his/her budget very greatly in order to cover the expenses. In a survey by the college board itself, the estimate of annual college expense - including tuition fees, room and boarding and incidental costs - comes to an astounding figure of $11,000 for a two-year college and $14,000 for a four-year college. If the college is private, then the costs could reach astronomical highs of $30,000 on an average per year. And to top it all, there is an inflation rate of 5-8% per year.

Solving this financial problem often becomes the focal point of student life. This is the reason why the government has come up with schemes to offer loans to students who wish to pursue higher studies. Federal aid has become today one of the largest pools of finance for students in the US. There are $67 billion available for handing out as loans to students to further their educational qualifications.

But there are many factors that determine whether or not a student gets a federal loan. The student is needed to fill out various applications, and then he/she would be granted the particular amount of money for the coming year. The requisites to get such a loan are a high school diploma, admission in a registered college for a stipulated number of days, maintaining a GPA in the classes, and being an American citizen.

The federal Stafford loan is perhaps the commonest of the federal loans available to American students today. This loan is also one of the easiest when it comes to repayment; the student needs to begin paying back only after six months of getting the graduating degree. Subsidized loans are the second-most popular types. These loans are given according to the financial needs of the student. The student requires to be enrolled for at least halftime in college. Contrasting with these are the unsubsidized loans, which are not dependent on the financial needs of the students. Parents are required to pay a certain amount of the loan within a given period of time.

Campus-oriented programs are also a source for obtaining loans. These could be given by the university or college themselves, in the form of grants or loans. The advantage of these loans is that they allow the student to work on the campus and hence return a portion of the loan while studying itself. These loans are dependent on the needs of the student. Such loans also make a student eligible for federal Perkins loans.

To apply government loans, the FAFSA website can be used. March is the month when fresh applications are entertained. Once the application is done, the processing of the loan would begin, which would include finding out which loan the student is eligible for. The options available to the student are put before him/her, which could be accepted or rejected by the student.

Students attending a university can also apply for private loans. These loans do carry higher rates of interest than federal loans, but they also provide more finance. The student needs to hunt a bit more for private loans, as regards lower interest rates.

Federal and private loans are the two main solutions for the problem of financing student courses. One more hidden advantage of getting such type of financing is that the student does not need to bother about inflation in the successive years while the course is underway.

An overview of Federal Student Loans

Are you beginning the process of figuring out how you're going to pay for college? Financial aid is great - it'll help you achieve your education dreams, but it's a complex process with a growing variety of student loan options from which to choose. Assuming you've explored all opportunities for scholarships and grants, your next option is to research student loans. These come in two general categories: federal student loans and private student loans.

The first place any prospective student should start is with federal student loans. Federal student loans are backed by the U.S. government and are available directly through your school or through banks and student loan lenders via the Federal Family Education Loan Program (FFELP). These loans typically have lower interest rates, multiple repayment options, longer repayment periods, and much easier credit requirements than private loans. In order to receive a federal student loan, you must complete and submit the FAFSA, the Free Application for Federal Student Aid. For assistance with this form, visit FAFSAonline.com.

Federal student loans come in a variety of forms, from need-based aid to loans targeted to parents:

Perkins Loan
The Perkins Loan offers a very low fixed rate of 5% to undergraduate and graduate students who demonstrate financial need. Depending on your level of need, undergraduates can borrow up to $4,000 and graduate students up to $6,000. Unlike other federal loans, the funds are dispersed from the school and the student does not have to be enrolled at least half-time to be eligible.
Stafford Loan
The Stafford Loan is the most common federal student loan as it is not necessary to demonstrate financial need - anyone can apply. These loans carry a fixed interest rate and come in two forms: subsidized and unsubsidized. The interest on subsidized Stafford Loans is paid by the government while the student is in school; the student pays the interest on unsubsidized Stafford Loans but they can defer making any payments until graduation. All Stafford Loans require the student to be enrolled at least half-time. Depending on year, students can borrow between $2,625 (freshmen) and $5,500 (senior) a year.
PLUS Loan
The Parent Loan for Undergraduate Students (PLUS) is targeted to parents of dependent undergraduate students who are enrolled at least half-time. Although there is not a full-scale credit check for these loans, the applicant must not have any adverse credit experiences on their record (e.g., bankruptcy, default). Parents can borrow up to the student's cost of attendance less any other aid the student has received. These loans carry a fixed interest rate that is higher than the rate for Stafford Loans, and repayment starts while the student is in school.
Private (or Alternative) Loans
As mentioned above, you should exhaust your options for federal loans before turning to private student loans. But federal loans often do not fully cover the cost of tuition. The market for private loans has been growing dramatically in recent years to help fill the gap between rapidly rising tuition costs and funding from federal student loans. There are a few pros and cons to consider when looking for private loans.

Pros:

* Students can borrow up to 100% of the cost of education
* Many offer borrower benefits that can reduce the interest rate
* Lower rates may be available if your school certifies enrollment and the check is sent directly to the school
* Funds may be used for tuition, room and board, books, or a computer
* You are not required to complete the FAFSA

Cons:

* These loans are subject to a credit check, which will determine approval as well as your interest rate (using a co-signer significantly increases your chances of approval)
* The interest rate is variable and may increase over the life of the loan
* Private student loans may not include a deferment option