Many students need additional financial aid in order to complete their college educations. In order to pursue this education, they often need to borrow money from an organization such as a student loan or a government grant. However, before students apply for student loan plans, it is advisable that they know the ins and outs of these programs. They must be aware that there are many types of student aid, each with its own requirements, benefits, and repayment terms.
There are two main types of student loan plans; federal and private. Federal student loans are made available by the US Department of Education through the Federal Family Education Loan Program (FFELP). Each year, government student loans offer more money to students than any other source of funding. The US government requires all students who participate in federal programs to obtain a Stafford or Perkins Loan. Both private and federal student loan plans offer different interest rates and payment options; however, the repayment terms for both types tend to be much more favorable to the government.
Federal student loan plans allow students to borrow money based upon their income and family status. Borrowers must meet income guidelines established by the US Department of Education before applying for student loan assistance. One benefit of federal student loan plans is that a student’s eligibility for federal assistance may be extended based on the total amount of student loan debt he or she has accumulated.
Private student loans are not available through the federal government. Students can only look to other sources for these loans. There are many private companies that offer private student loans. Private student loans usually have much higher interest rates than those offered by the federal government. Some private companies even offer special deals that include lower interest rates when the student graduates or transfers to a different school.
When applying for student loan plans, prospective borrowers must first determine how much they plan to borrow. There are many factors that go into this determination. Some examples of factors that will affect a student’s funding decision include his or her expected yearly income, expected future earnings, and the student’s credit rating.
Most student loans come with grace periods. During these periods, loans are subject to frequent renewal. If a student opts for an interest rate holiday, the grace period will automatically renew. Most student loans also feature a graduated payment schedule. The repayment plan starts off with a lower payment and increases as the student obtains further degrees or certifications. The most common payment schedule for graduate student loans is two to three percent monthly.
In addition to private and federal student loans, there are also loans sponsored by the government. These types of student financial aid are often called Stafford Loans and Perkins Loans. In order to receive any of these loans, a student must have a FAFSA or Federal Application for Federal Student Aid. In order to qualify for these loans, a student’s parents must provide proof of their student’s eligibility. In general, parents who are the primary wage earner are given priority over other families.
Private student loans have different payment plans than federal loans. Students can choose to pay their loans in one lump sum, via a graduated payment plan, or spread out payments over time according to their affordability. They also have the choice of paying back the loan in only a few years or the entire life of the student. With private student loans, a student may not need to begin paying back his or her subsidized loan until he or she begins working. Finishing school and starting work directly after will allow a student to pay his or her loans in full at this time.