Student Loan programs are available to college students who wish to take advantage of the financial aid for higher education. Federal loans and private student loans can provide funding for college tuition as well as living expenses while attending school. They are a great help for students with low or no credit history. These programs are targeted at providing assistance to those who are financially handicapped, which can include single parents, military personnel and single unemployed individuals.
The U.S. government offers loans to students in need through six different types of programs. These programs are the Pell grant, Federal Perkins Loan, Direct Plus Student Loan, FFEL Plus Student Loan, and the William D. Ford Federal Direct Loan. Of these six programs, only the Pell grant has any type of interest-free grace period during which a student does not have to repay the loan. Students who wish to take advantage of this benefit should begin by filling out the Free Application for Federal Student Aid (FAFSA) which is provided by the federal government. The form is available online.
One of the common ways for graduate students to consolidate loans is to obtain subsidized Stafford loans. A subsidized Stafford loan is provided by the federal government for the specific purpose of paying for college expenses. The Federal Family Education Loan Program (FFELP) also offers subsidized Stafford loans for graduate students and parents who want to obtain a loan for their children. For both subsidized and unsubsidized loans, repayment terms and conditions are different. Students must complete the FAFSA form while they are still in high school.
Private student loan programs can be used for a variety of purposes including tuition and living expenses. A bank loan, for example, can be used for books, tuition and other academic expenses. Most banks require that the borrower live at home in order to receive the loan. Repayment terms for loans are usually much more flexible than those for federal loans.
The federal government limits the amount that any one person can borrow from the federal government for a private student loan. This limit is based on financial need. However, private lenders may also have similar limits for borrowing. For example, some lenders limit the amount that a borrower can borrow based on how much they earn from other sources. The Federal Housing Administration allows qualified borrowers to borrow up to the maximum amount that is authorized by the Department of Housing and Urban Development for a residence located in the United States.
Before borrowing, it is important to compare the interest rates offered by different lenders. Federal loans generally have lower interest rates than private student loan programs. Students should carefully review the interest rates that they are being offered prior to submitting an application for any student loan. It is important to not only get a good interest rate but also to get a good interest rate that will not increase when the student finishes school and has to start repaying the loan.
If a borrower chooses to use a standard interest rate from an institution that participates in the Federal Reserve System, they can be assured that their interest rates will remain stable throughout the life of the loan. Many private student loans do not participate in the Fed System. When opting for private student loans, borrowers should inquire about the Libor interest rates. An institution that allows the Libor rates to fluctuate will be less stable than an establishment that has constant Libor interest rates.
Graduates of college and those who have yet to begin employment can apply for federal student aid programs during the current enrollment year. This will give borrowers the opportunity to experience what it like to receive federal assistance. However, graduates must begin making payments toward their debt as soon as their first paycheck comes in. Graduates must complete the Repayment Begins statement from their first six months on active duty with the US Military or their first date of separation from the military. The six-month period starts with the day that the borrower begins active duty.