Students and families are often confused by the variety of options available when it comes to financing a college education. There are a wide variety of options, from college scholarships and grants to federal and private student loans.
As part of the Higher Education Act of 1965, President Lyndon Johnson created this act that was intended to “strengthen the educational resources of our colleges and universities and provide financial assistance to students in postsecondary and higher education.” This increased all sources of federal funding provided to colleges and added grants and other forms of financial aid.
The Federal Stafford Loan is available to undergraduate and graduate students enrolled at least part-time at a college or university that accepts federal aid. This is a need-based program where college students can borrow up to $ 5,500 per year in subsidized funds based on academic level and graduate students can borrow up to $ 18,500 per year (up to $ 8,500 in subsidized funds and the rest in unsubsidized funds). The funds are sent directly to the school and applied to the student’s account. To ease the financial burden, no payments are required until six months after the student graduates. When looking to apply for a Stafford Loan, students should see what types of borrower benefits each lender offers. Because these student loans are all pegged at the same interest rate set by the U.S. government, lenders are offering incentives to borrow through discounts, such as fee waivers, prepayment rate reductions, and repayment. cash.
While a federal Stafford loan is certainly a necessary start, it doesn’t always cover the full cost of education. A PLUS loan for parents is a common way that parents contribute to the education of their children. This credit-based loan allows parents to borrow the full cost of an undergraduate education, including tuition, room and board, supplies, college fees, and more, less any other aid received. Once the loan has been deposited into the student’s account at the school, repayment begins shortly thereafter, at which point the student loan consolidation process can be completed. At a fixed interest rate, the PLUS Parent Loan is an easy and cost-effective solution to help bridge the gap between Stafford loan financing and the cost of education.
For many years, graduate students only received Stafford loans as a federal loan option to finance their often expensive education. The difference was offset by home equity, savings, wages, and private loans. However, the Graduate PLUS Loan is a new product that became available to graduate students in 2006. Graduates with good credit can self-sign a loan up to the cost of education, less any other aid received. The Graduate PLUS loan can be applied to tuition, room and board, educational supplies, laboratory, and travel expenses. The interest rate is fixed and no payments are required while you are enrolled in school. Upon graduation, Borrower Benefits are activated to help students save money during repayment. Or a student can save even more by consolidating this loan through the federal loan consolidation program. The Graduate PLUS loan truly provides graduate students with a great option to make their graduate education dreams come true.
The Perkins Loan is another federal loan available to undergraduate and graduate students that is offered based on financial need, other aid received, and the availability of funds at each school. The federal government lends funds to schools to distribute to the neediest students. The school, therefore, is the lender, and college students can receive up to $ 4,000 / year and graduates can receive up to $ 6,000 / year. These loans must be repaid directly to the school and have a fixed interest rate of 5% from the start of the program. Students can take advantage of a nine-month grace period and a ten-year payback period. However, consolidating with any existing federal student loans, including Stafford or Graduate PLUS loans, can extend your repayment term. Consolidation has been mentioned several times and it really is in the best interest of students to take advantage of this upon graduation. Each federal loan, by itself, has a repayment term of 10 years, regardless of the total debt on the loan. Consolidation fixes the interest rate and extends the repayment term, allowing more time to pay off an often large federal loan debt.
Named after Senator Claiborne Pell, the Pell Grant was established to provide funds that do not need to be reimbursed directly to the neediest students. This is because it is a grant and not a federal student loan. However, like the Stafford and Perkins Loans, eligibility is based on need, as determined by cost of attendance and expected family contribution. Since 2003, the maximum Pell Grant award has been $ 4,050 per academic year. However, due to the rising cost of education, many wonder why the Pell Grant award has not increased as well. The Pell Grant covers, on average, one-third of the annual cost of education at a four-year public institution. However, twenty years ago it covered about 60%. On February 15, 2007, in an attempt to slowly combat this problem, President Bush signed legislation that would increase the Pell Grant to $ 4,310 for the 2007-08 academic year. The following year, the grant will increase to $ 4,600 and up to $ 5,400 by 2012. These advances are certainly helping students and families finance the cost of education, especially as tuition costs continue to rise.
Private student loans have gained popularity in recent years because federal funding has not covered the full cost of education. There are many other costs associated with education besides tuition. Commuters must cover transportation costs in some way. City campuses do not always guarantee housing, forcing students to search for an apartment off campus, often with high rental costs. There are expensive textbooks, lab supplies, and flights to buy that aren’t always covered by traditional financial aid. Private loans are originated to students by a bank or other financial institution, unlike federal loans. Private student loans also offer benefits similar to a federal student loan, such as deferred payment until graduation, different loan repayment terms, and borrower benefits. Interest rates on private loans vary from business to business and are generally based on credit. Co-signers are a great way for a student with limited or no credit to obtain this loan. Due to the variety of private loans available, most parents and families “shop around” until they find the ideal solution.
