Educational Loans

[The Graduate]

School is a very expensive investment, and not everyone qualifies for grants or scholarships to pay for it. If
you find yourself in that dilemma, Educational loans might be the direction you need to go. Unfortunately, student loans have to be repaid after graduation, with interest. If so, there are a few things you should know, in order to make the right decision about which loan you should apply for, as well as the loan process in general.

First of all, there are three major types of educational loans with different advantages and disadvantages, as well as a fourth which helps you simplify all your loan payments into one.

1. Student loans are federal government loans with low interest rates and don't require a credit check. -The Stafford loan is the main government student loan. Can be either subsidized, which means the government pays interest while you're in school, or unsubsidized, which means the student has to pay back everything including interest after graduation. For new Stafford loans disbursed after July 1, 2006, the current interest rate is fixed at 6.8%. For Stafford loans disbursed between July 1, 1998, and June 30, 2006 the interest is 6.62% in-school and 7.22% after graduation. The repayment period begins 6 months after graduation and is generally spread out over a 10 year pay-period.
   
   -The Perkins loan is for those with exceptional financial needs, and is the best loan offered. The government pays interest while the student is in school, as well as a 9-month grace period after graduation. There are no additional fees and the interest rate is fixed at 5%.
   
   
2. Parent loans, now called Plus loans, are available to parents who's student's financial aid package was not enough to cover school. It is an unsubsidized loan with a 8.5% fixed interest rate, as well as 4% loan fees which are deducted from each disbursement. Repayment begins 60 days after full disbursement and it has 10 year payment terms as well.
3. Private Education loans or Alternative Education loans are somewhat of a last resort if student loans do not cover your education costs. Qualification for The Private Education loan is based on your credit score. It tends to cost more than those the federal governments offers, because the interest rates are variable and usually much higher.
4. Consolidation loans basically help you put all previous loans into one more simplified payment plan. If you have a mix of student, parent, or private loans, a consolidation loan lets you consolidate all those loans into one payment to one lender. In some cases you can lower your interest rates as well.

As you can see, if loans are a resource you must use, the student loans are the best available, specifically the Perkins loans. If you can manage to pay through student loans and other resources, it is much more beneficial than utilizing Parent and Private loans because of the higher interest rates and inconvenient repayment terms. Scholarships and grants should definitely be considered before resorting to loans for educational costs.

If you have any additional tips or resources to share, or if you have any questions, feel free to leave a comments.

by The Business Shrink Graduate