Best Student Loans
When it comes to getting a student loan to assist in your college finances, those granted by the federal government are often the best choices. This is the case because these federal loans give you much more convenient terms (especially in regard to repayment!) than do the more privatized loan providers. Also, federal loans do not require a co-signer, such as your parents, to sign in order for you to receive the money. Basically, there are 3 types of federal loans that you can look into. Keep in mind, though, that these options are for undergraduates only. Each type has their pros and their cons. For example, some may have a better interest rate or else are easier to be approved for. However, beware that each one equally has the same risk, which is that these types of loans are very tricky to escape from, in terms of repayment, should you find yourself in dangerous financial waters in the future. Thus, below is a rundown of the essential information you will need to wisely choose the best federal loan for you.
This type of loan gives you a low interest rate that is so often necessary to help you pay for your college costs. Furthermore, Perkins loans are available at over 1,700 colleges and universities across the country, and you can borrow as much as $5,500 each academic year. The loans operate by gaining their funds through various activities such as when a college collects money already owed via past Perkins loans, as well as reimbursements that the Department of Education gives to schools. As mentioned above, a great pro about this loan is that there is a very low interest rate. In fact, while you are still in school, there is zero interest and you will not be required to make any principal payments. Another perk is that should you decide to get into a public sector job such as a teacher, a percentage of your Perkins loan will actually be canceled! On the downside, however, in terms of repayment, as soon as the 6 month mark hits, post-graduation, you must begin to repay your loan, with an interest rate of 5% being included. Also as a con, each college or university has only a certain sum of Perkins loan money to dole out, with some schools having more than others. Thus, while you might be able to receive money from one school, another school may not be able to give you anything.
Subsidized Direct Stafford Loans
These types of student loans are for those students who fall within the category of attending college at minimum half a course load, and who for one reason or another cannot financially make ends meet to pay the total cost of their tuition. Unlike a Perkins loan in which the school itself doles out the funds, a these subsidized loans gives the student money directly on behalf of the government. The amount of money a student may borrow varies according to the student’s academic level. So, for example, if you’re a freshman, you can receive as much as $3,500, for a sophomore the amount increases to $4,500, and then if you’re a junior or senior you can get a maximum of $5,500. One drawback to this type of loan is that not all of the country’s colleges take part in this program. Also, if you are approved for these loans, you are required at the time of receiving the loan, to pay a one-time fee equal to 1% of your loan amount. One other con is that 6 months post-graduation, interest on your loan will automatically begin to build up, with an interest rate of 6.8%. However, there are benefits, such as that while you are in school you will not be charged interest or be required to pay any of the principal loan. Also, during the six month period after you graduate, you are eligible to apply for the income-based repayment program to make sure any loan payment you make does not go over 15% of your monthly income level. Finally, by signing up for this income-based repayment program, you can have a portion of your loans canceled in 10 years if you should begin working in a public sector job such as police or education.
Unsubsidized Direct Stafford Loans
These loans are specifically geared toward students who require more financial assistance than the subsidized loans are able to give. So, after you’ve been approved for the subsidized loan, you can then apply for the unsubsidized type, and thus receive a minimum of $2,000 per academic year. As with the subsidized version, the amount a student is eligible to receive depends upon academic level. Thus, if you’re a freshman you can get a minimum of $5,500 per year, for sophomores it rises to $6,500, and then for every additional year thereafter $7,500 is the minimum. Additionally, if your parents have been denied approval for a PLUS loan, or if you are considered an independent student (23 years old or older), you may be able to receive $9,500 per year as a freshman, $10,500 as a sophomore, and $12,500 for every year thereafter. One great thing about these unsubsidized types is that as long as you attend college at a minimum half course load, you will not be required to make any loan payments. However, these loans do make you pay a one-percent fee, and will also begin to accrue a 7.0% interest rate immediately. Furthermore, as with the subsidized loans, payments must begin to be made at the six months post-graduation mark. But, similar to the subsidized type, students on the unsubsidized type can apply for income-based repayment program in order to, again, make sure any repayments do not go over 15% of their monthly income.