Tag Archives: federal loans
Financial Aid for Students (Page 1 of 2)
While navigating future dreams of career and success, students are often left bewildered and surprised by the costs of post-secondary education. While we all recognize that college and university degrees can offer opportunities we would otherwise miss, it can be daunting to imagine ourselves spending so much money on them.
Most students find that loans are a necessary reality when pursuing post-secondary attention. Although savings and scholarships will certainly contribute, loans can be a way to invest in the future even when you havent yet found ways to put money away for it. Student loans are competitive and you can find the best choice for you by considering several different options.
There are a few common loan types that you will want to investigate, including federal loans, personal loans, and consolidation loans. And as with any loan, you will need to consider the interest rate as well as loan limits and fees, and especially terms. By understanding terms you will know when it is time to start repaying, and avoid late or missed payments.
Typically interest rates are lower on federal student loans then on personal loans, which are awarded by banks and other lending institutions. Typically personal loans start incurring interest immediately and may require you to make loan repayments immediately, whereas federal loans often allow a term that includes at least the length of your post-secondary program, and perhaps several months after. With the longer term provided by federal loans, you can get some extra time to find a job after school.
Personal loans may also require a cosigner, such as your parent, and may not have the options for deferment and forgiveness that federal loans do. While private loans can be a life-saver when federal loans and other methods are not possible, it is in your best interest to try for federal loans first.
Consolidation loans are typically used when you want to refinance your student loans, either because the minimum payments are too high, or because you can save on interest rates. Keep in mind that consolidating to extend your repayment will create more costs in the end as the interest will continue to accrue. Any gain in interest may not be worthwhile, and for federal loans in particular, you are likely already getting the best rate. Finally, consolidating your federal loans can mean you lose options relating to deferments and forgiveness, so be sure if you go that route you can make your new payments on time, every time.
Dont Make This Mistake
Dont make the mistake of simply missing payments back on your student loans when the time comes. This is called a “default”, and has some severe penalties. If it occurs, your loans may be turned over to a collection agency which can incur court costs and attorney fees you may end up responsible for on top of your loans and interest. Your wages could be garnished, your tax refunds and other government benefits could be intercepted, you wont be eligible for other federal aid, and perhaps most importantly, your credit record will be damaged badly. A bad credit report can prevent you not only from obtaining auto loans, mortgages, and credit cards in the future, it could also result in job applications and rental applications being denied.
College Loan Consolidation – Advantages and Disadvantages
College tuition is on the rise and students and parents alike are seeking additional methods to help pay for the soaring costs. Student loans, grants, scholarships and work-study are common ways to supplement or completely pay for the cost of college.
Student loans are probably the most popular of financial aid sources. It’s quite usual for a single student to take out multiple loans to cover the many expenses of a college education – tuition, transportation, dorm, books, etc.
At the end of a college student’s career, they often find themselves facing a hefty sum of financial payments which start after a six to nine month grace period post graduation.
Many students turn to College Loan Consolidation to reduce the stress of multiple, high payments, opting for the lower payments and extended terms of a student consolidation loan. While there are advantages to student loan consolidation, students should fully research and analyze all of the aspects of loan consolidation.
College Loan Consolidation – Federal vs Private
Federal loans are more popular than private loans for a few reasons. Federal loans have lower and fixed interest rates and additional benefits such as grace periods. Private loans usually have higher interest rates, and no grace periods.
When consolidating, keep the types of loans separate in order to retain the benefits of the Federal loans. Federal loans provide a cap on the interest rate, along with fixed interest rates.
College Loan Consolidation – Advantages and Disadvantages
It is important to consider both the advantages and disadvantages before applying for a student consolidation loan.
Advantages include:
A lower monthly re-payment amount
Lower interest rate, which may save you money in the long run
Organization of loans – make a single monthly payment
Disadvantages include:
Possibly paying more money over the life of the loan
Most likely paying on the loan for a longer amount of time – 10 to 30 years
There are few options to consolidate this loan later
If you decide that college student loan consolidation is for you, start by conducting extensive research. Begin with federal student loan consolidation programs such as Federal Family Education Loan Program and Direct Loan Consolidation. They offer fixed interest rates capped at 8.50%. There are also other free resources to help you choose. It is important to shop around and gather as much information as possible in order to make the best decision.
For private student loan consolidation, inquire with various lenders both offline and online. Many times, online vendors provide a lower interest rate and quick approval times.
Perform exhaustive research until you are completely comfortable making a decision, as this decision will make quite an impact on your financial future for a number of years.