How to get a student loan

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What is a student loan
Types of student loans
Qualifying and applying for a student loan

What is a student loan

A student loan is a loan designed for students, in order to help them pay the expanses a student life brings, such as college tuition, books, everyday living. This financial aid must be repaid with interest, but in some cases it can be subsidized. This loan differs from other loans through its substantial lower rates and the repayment characteristic: the student starts paying back after he has finished studying.

Types of student loans

Student loans come from two major sources : federal government and private lenders.
Throughout federal program, students can take out loans (Stafford, Perkins) at much lower rates and delay their repayment until they graduate. Loans can be made also to their parents(PLUS ). In this case amounts can be much higher, but payments start immediately.

Another category of loan is federal loan consolidation. This is for students who have started repaying the loan of for parents who wish to extend the refunding period on their current PLUS loan. It can also be used to obtain a fixed interest for loans with a variable interest rate.

For some might be helpful to combine all their federal student loans in a Federal Consolidation loan. This will lock the interest rate on the loan and possibly lower the payments through an extension of the loan. Repayment period extension leads to paying more in interest over the life of the loan.

In those cases where federal loans do not cover the expenses, the private loans come in action. Also called alternative student loans, they are made by banks and other lenders. Naturally, they do not have the federal benefits. Interest rates can be higher, a good credit will be necessary and in most cases the student will need a qualified co-signer in order to get the loan.

Qualifying and applying for a student loan

Most college students in U.S. qualify for a student loan. The amount they can borrow though differs based on several factors like income level, parents’ income level and other financial consideration. To apply for a federal loan a student must file The Free Application for Federal Student Aid (FAFSA). To apply for a private loan, the student must first decide. While interest rates and loan terms are competitive, they can vary from lender to lender. It is better to compare student loans and, after a decision is made, an application can be submitted online. In many cases a decision on approval is obtained instantly.

In conclusion: if higher education is your goal, but your pocket cannot cope with all expenses, you have a large variety of options to get you moving.

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