Tag Archives: government
Lending
The lending of assets such as money, property, or other valuable personal belongings is a time-honored tradition. In the old days of lending, when local banks ran out of money to lend for mortgages, community growth was halted and so was the opportunity for business expansion. The federal government recognized this problem and initiated a plan to restock bank capital by substituting as a mortgage broker.
They set up the department of Housing and Urban Development, or HUD, as it is commonly known. Many specialized agencies of HUD developed, and you can probably recognize them by their acronyms such as VA, FHA, Fannie Mae, etc.
The federal government ran detailed studies and statistical analyses to determine why loans succeeded or failed. Their studies resulted in a set of guidelines and conditions that loans would need to conform to in order for HUD to purchase them from the banks.
These specialized agencies of HUD then offered to buy loans from the banks, allowing the banks to make a profit. This process has opened doors for investors to pool their capital and form national lending institutions, selling their pools of loans to the federal government.
The government would in turn securitize large groups of these loans and sell them to Wall Street as mortgage-backed securities. Wall Street sells these loans to national and international investors, which helps explain the daily precariousness of interest rates.
Over the years, more Americans began falling out of perfect credit, which created the necessity for lenders who were not as strict as the federal governments agencies. These lenders had the financial strength to purchase large pools of loans, securitize them and sell them directly to Wall Street for even larger profits! They translated higher-risk loans into higher interest rates and therefore higher earnings. Thus began another cycle of lending and mortgaging.
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.