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 The Difference Of Consolidating Private VS Federal Student Loans?

Contrary to popular belief, private loans can be consolidated. Here is what you should know if you have them and are considering consolidation.

1. Do not consolidate them with federal loans even if they provide the option.
2. They can’t consolidate until you’re out of school and beginning repayment.
3. In most cases, consolidating private loans will leave you with a variable rate loan and it will not typically fix your loan rate (like federal consolidation).
4. Keep in mind that the best option is often to leave them alone. How to know?

Remember that federal student loans are subject to unique terms and conditions and may not be combined with the Student Loan Consolidator Private Consolidation Loans. You need to take advantage of separate federal and private consolidation loans companies for this.

Look at the benefits of your current lender. There are only about ten lenders that will consolidate any private loans. Most companies require that you have loans with them to be eligible to consolidate with them.

The amount will vary, some will require that you have one or more loans with them some and will require 50 percent or more of the consolidating amount be to with that lender. Researching your lender is a good start.

You should shop around and as mentioned, there are few companies that don’t have stipulations in order to use their consolidations or refinance programs. Here’s a published list: http://finaid.org/loans/privateconsolidation.phtml. The lender, not the government, dictates the interest rates provided and most are linked to the Prime Rate.

Most Often Asked Questions Regarding Consolidation Of Private Student Loans

Is there a certain loan amount that must be considered for private consolidation of loans? Yes, the minimum loan amount is $7,500. And the maximum amount is $300,000.

How can I find out how much I owe and when my private student loans will be approved for consolidation? By reviewing your most recent monthly statement and checking your on-line access to your account balances. And once your required documentation has been received, a loan decision and if approved, will begin the process of paying off the loans you listed for consolidation. Once completed, you will be sent a letter of confirmation.

Regarding interest rates, what is the interest rate on my loan after the first year and can I make interest-only payments in my second year? On the first anniversary of your loan closing, the interest rate on your loan changes to Prime Rate or LIBOR plus 5.oo percent to 5.75 percent, depending on your credit history or if you have a co-signer.

During the second year, you are still eligible to make interest-only monthly payments. It is only on the second anniversary of the loan closing that you will be required to make principal and interest payments.

Which types of loans are eligible to be consolidated in the Private Student Loan Consolidation Program? Any existing nationally marketed private student loan is eligible for the Student Loan Consolidator Private Consolidation Loan. Federal student loans, home equality loans and credit card obligations are not eligible for consolidation.

If you are unsure whether a loan may be eligible please call the customer support center at 866-496-5787.