Tag Archives: federal
Student loan (Page 1 of 2)
DEFINITION
A loan is a debt, which entails the repartition of financial assets over time, between the lender and the borrower. The borrower receives an amount of money from the lender, which should be paid back to the lender. The cost of the service depends on interest on the debt. Student loan is a loan offered to students to assist in payment of professional education. It doesnt matter if you are graduate or undergraduate student. You can borrow money in all cases. Parents may also borrow to pay the cost of education for dependent undergraduate students. Maximum loan amounts depend on the student’s year in college. These loans usually carry lower interests than other loans and are usually offered by the government. Often they are supplemented by student grants which do not have to be repaid.
THE POINT
The cost of professional education rises every year that is why today, student loans are a fact of life. The key role belongs to the government as in any government sponsored program. While included in the term “financial aid” professional education loans differ from scholarships and grants in that they must be paid back. Student loans provide a variety of postponement options and extended repayment terms and do not require credit checks or collateral. The federal funds for education are limited and government and private lenders give the students flexibility in choosing the type of college that is right for them.
CATEGORIES OF STUDENT LOANS
There are different types of student loans that are available. They include:
Stafford Loans: Stafford Loans are issued by the federal government. They have a lower interest rate than other types of loans. There are either subsidized and/or unsubsidized Stafford Loans. When you take subsidized loan, the government pays your interest for you while you are studying. Subsidized loans are based on financial need. With unsubsidized loans, you will be charged interest while you are studying, but do not have to begin paying the loan until you graduate college. Unsubsidized loans are available without showing financial need. You must begin paying back these loans 6 months after you graduate.
Direct Student Loans (Perkins Loans): Perkins loans are given to students based on extreme financial need, and usually have very low interest rates. The interest rate is lower than a Stafford. Since the college already has been given its Perkins funds, it simply transfers the loan to your student account as a credit. You have to begin paying between 6 and 9 months after you graduate.
Subsidized Direct Loans: Direct loans are the same as a Stafford except that the federal government is the lender.
PLUS Loans: This is a parent loan, offered by the federal government that is unrelated to need. Generally, parents can borrow up to the total cost of education, minus any aid received. These loans are given regardless of your income, but lenders will consider your credit history. The interest is low on this type of loan and repayment usually begins within 60-90 days after full disbursement of the loan, or after the student graduates.
Graduate Student Loan Rates (Page 1 of 3)
Few students can afford to pay for college without some form of financing, and graduate and professional students borrow even more than undergraduates, with the additional debt for a graduate degree ranging from $27,000 to $114,000. Fortunately, graduate student loan rates are low. Federal law sets the maximum interest rates and fees that lenders may charge for federally-guaranteed loans. Nothing prevents a lender from charging lower fees, and many lenders offer a variety of discounts to attract borrowers.
Grants, scholarships, work-study, and other forms of gift aid just do not cover the full cost of a college education. Many students find that they must supplement their savings with government and private loans. The Federal education loan programs offer lower graduate student loan interest rates and more flexible repayment plans than most consumer loans, making them an attractive way to finance your education.
How can you figure out how much your graduate student loans will cost when the interest rate is often variable? You’ll be pretty safe if you figure on a rate of around 8%. That’s more than the current rate for federal student loans right now, but rates may go up, and most loans are capped at 8.25% to 9%. (If you’re a parent using a home-equity loan, your rates were fixed when you borrowed the money. If yours is a home equity line of credit, however, your rates are variable, so use an 8% interest rate to be conservative.)
At 8%, each $1,000 you borrow will cost you about $12 a month to repay, assuming a 10-year loan. If you’re a graduate student and you borrow the maximum allowed under current federal student loan programs $23,000 in subsidized and unsubsidized borrowing for undergraduates who are still their parents’ dependents your monthly payments will be around $276.
The rate for PLUS Loans disbursed on or after July 1st, 2006 is fixed at 8.5%, while the rate for Stafford Loans disbursed on or after July 1st, 2006 is fixed at 6.8%.
Shop for graduate student loan rates in order help manage your future debt burden. Your school’s financial aid administrator can help you consider all of the important factors when comparing loan programs. The guidelines for Federal Stafford and PLUS loans are established by the federal government; however, there are some lenders that make adjustments to the terms in order to provide savings to borrowers. For example, many lenders discount fees on Federal Stafford Loans (that normally would be deducted from the amount disbursed to the borrower). And some lenders offer borrower benefits or payment incentives on Stafford and PLUS loans. Be sure to compare lenders before borrowing your federal student loans.
When choosing a private graduate student loan, there are many things to consider. You should investigate the features of several private loans and prioritize which factors are the most important for you, including the overall cost of the loan, credit criteria and approval rate, monthly payment, grace period, deferment, and forbearance, reputation of the lender, customer service, and other services.