Beginning At The Top For Loans

The executive director of the Project on Student Debt, Robert Shireman, was interviewed regarding the best strategy for students to use for financial-aid decisions regarding higher education. We will review his comments and advice regarding the Stafford Student Loan and others.

Go with the federal loans first, not only do federal loans carry a fixed interest rate, but they also are easy to apply for and offer flexible repayment terms and, in some cases, a government subsidy for part of the interest.

As with other loans that are used for higher education, you can deduct interest payments of up to $2,500 per year if single.

The number one government loan to aim for is the Perkins Loan. It offers students up to $4,000 a year at a fixed 5 percent rate. The feds pick up the tab on the interest until the loan comes due. Students can defer repayment for nine months after leaving school and spread the payments over ten years.

You don’t have to shop for a lender to connect with a Perkins. Schools distribute dollars themselves. These days, they dole them out sparingly.

The federal fund that supplies the loans isn’t being replenished to the full amount. Students who are lucky enough to be offered a Perkins Loan should waste no time accepting it.

Where The Stafford Loan Falls In Place Of Loans

The next loan you should you want to go with is the Stafford Loan. This loan is available to any student who applies for federal financial aid; it carries a fixed rate of 6.8 percent, compared with the recent prime rate of 8.25 percent.

Students may borrow up to $3,500 a year as freshmen, $4,500 as sophomores, and $5,500 as juniors and seniors. If your family qualifies for need-based aid, the federal government will pay the interest on the Stafford Loan until it becomes due.

Otherwise, interest starts building on day one. Students can defer repayment until six months after graduations and extend repayment from the standard ten years to as many as 25, lowering the monthly amount (but adding to the overall cost of the loan).

Uncle Sam makes for a lenient lender, as long as you don’t duck out on your obligation altogether. Borrowers who ask for forbearance can postpone payments for up to a year at a time and defer them if they return to school.

Stafford Loans offer subsidized and unsubsidized loans. What is terrific about a Stafford Loan financial aid package is you may be eligible for either one or a combination of both. The big difference between the two is when the interest begins to accrue.

The Plus Loan (Parent Loan for Undergraduate Students) follows the Perkins and Stafford Loans from the government. After this you would have to look into private loans, which carry variable rates and tougher terms.

The government loans are by far the best if you are able to obtain one. You are able to combine a Stafford Loan with other available loans and they work with you in the installment, enrollment and repayment areas.

What Is A Graduate And An Undergraduate Student?

An undergraduate is a person who is studying for a first degree at a university. Undergraduate simply refers to less than a 4-year degree such as a BA or BS or AA or AS degree. Here you would be taking freshman through senior courses.

You must complete a 4-year degree prior to entering graduate school for an additional two to three years or more of study. The graduate student now begins working on a Masters or Doctorate degrees.

Undergraduate Loans

Undergraduate students have many college loan options to finance their college careers. Loan types range from those available to students themselves, as well as those available to their parents. There are private and alternative loans, as well as federal loans to help out. Any of these loans or a combination of all could work for the student.

Undergraduates usually rely on a mix of grants, loans and scholarships. The student can sometimes take out these loans alone or with the help of their parents. Also, the student and the parents can work together as a co-borrower or co-signer.

There are various types of undergraduate student loans including federal loans that are made directly to students like the Perkins Loan, subsidized Stafford Loan or Unsubsidized Stafford Loan. There are also federal loan solutions for parents or undergraduate students like the Plus Loan.

And of course there are many alternative or private loans for student’s an/or their parents.
These loans are made to the students and their parents by banks or other lenders and can help meet the costs of going to college.

Graduate Loans

Graduate education loans are available to students who choose to continue their studies in a graduate degree program. This can include business school, law school, medical school, and more.

Graduates often have fewer options for scholarships and grants just when tuition fees rise. One aid that is available to them is a teaching and/or research assistantship. These positions though have low pay rates and you are required to work long hours.

Graduate and continuing education students have financial needs that are different from those of other students. While they continue their education, they also continue to take on more student debt. And often these graduate school loans are added to the undergraduate debt that they already have.

Graduate students may be eligible for certain types of federal graduate school loans. This includes the Perkins Loan and both the subsidized Stafford Loan and unsubsidized Stafford Loan. The basic rules and qualifications of the undergraduate versions of the loans will apply, but the maximum amounts to borrow are higher.

For subsidized Perkins Loans during the 2007-2008 school year the loan limits for graduate students are $6,000 per year and $40,000 overall. It is best to note here that the $40,000 must include any undergraduate Perkins Loan totals as well.

For the 2007-2008 school year the Stafford Loans limits are $20,500 per year with a total limit of $138,500 including all undergraduate Stafford Loans. And no more than $65,500 may come from subsidized Stafford Loans. Luckily graduate students are able to defer their remaining federal undergraduate loans along with any new federal graduate loans.

Most private graduate school loans also allow students to defer payments until they finish school. Private lenders like banks, credit unions and online lenders have many continuing education and graduate school loan options. Some lenders have loan options that will cover the needs of both graduate and continuing education students.

For all students, the more you research, investigate and explore all of your options the happier you will be when the time comes. Or perhaps, when your school years have ended,

The Prospects Of Student Loans

Knowing how to get the best deal on a student loan is ultra important since loans account for 75 percent of all financial aid. Grants only make up for 25 percent. However, student loans are widely misunderstood by both the students and by the parents.

As with most purchasing decisions, you need to shop around among the lenders that are available to you. The best place to start looking is in the state where you live or where your child will be attending school.

College tuition is increasing at an average rate of 7 percent annually. This is well over the rate of inflation and students are borrowing money to pay for their education more and more through student loans. If you think about it, getting at least $50,000 to pay for college (and often times much more) is no easy task for someone who is only 18 to 21 years old.

There are a few students that will have saved or will be lucky enough to have parents who have saved enough for their children’s college education. Also, many students do work their way through college, and hey, why to go! That’s quite an accomplishment.

Where To Start Looking For That Loan

It is best to go straight to the federal loans, per Robert Shireman, who is the director of the Project on Student Debt. Not only do new federal loans have a fixed interest rate, easy to apply for, have flexible repayment terms and often have a government subsidy for part of the interest.

Next go shopping for a Perkins loan, which offers students up to $4,000 a year at a fixed 5% interest rate. It is considered next among equals in the federal loan lineup. The students can defer repayment for nine months after leaving school and spread the payments out over ten years.

Also, graduates who work as teachers or social workers in low-income neighborhoods or who fill other needed jobs may qualify for loan forgiveness. The federal fund that supplies the loans is not being refilled to the full amount as in the past, so if you are lucky enough to be offered a Perkins loan waste no time in accepting it.

After a Perkins loan, it is recommended to apply for a Stafford loan, which is also among the federal financial aid packages. Students may borrow up to $3,500 a year as freshmen, $4,500 as sophomores, and $5,500 as junior and seniors. If your family qualifies for need-based aid, the federal government will pay the interest on the Stafford loan until it comes due.

Students can defer repayment on this loan until six months after graduation and extend repayment from the standard ten years to as many as 25 years and this would lower your monthly payments. However, this would also add to the overall cost of the loan due to the fact that the interest would keep growing.

Something I find rather sad, is that even after having been accepted for both a Stafford loan and a Perkins loan combined, this still will not be enough money to get you through school alone at a private university.

Let’s move on to the next available loan on the list. To cover the gap, after that look to a Plus loan, which is a Parent loan for students. A basic credit check to get this loan must be passed.

Once approved, you can borrow up to the total cost of attendance minus any other financial aid although, the standard Plus loan does require you to start repaying within 60 days of payment. There are some lenders that will allow you do defer repayment until you have left school.

Some Positive Tidbits for Loans

When you start repaying the money, some lenders will give you a break on the interest rate of about a quarter-point if you have the funds automatically withdrawn from your bank account.

If your payments are made on time for the first 24 months, some lenders will forgive origination fees on your loan in excess of $250.

Some lenders will knock two percentages of points off your interest rate for the remaining term of the loan if you pay on time for the first 48 months.

Whatever type of loan you apply for or are accepted for ask them if there are any unadvertised specials by taking out the loan with the lender. Mention the items above; often students are rewarded for a prompt repayment record.