When you’re getting ready to go to college you’re going to have to look into a list of things and your financial aid package is one of the biggest items on that list. Did you get scholarships, work-study, grants or loans? If you got loans, how much do you need to borrow and can you borrow it all from one lender?
The best of all loans are Federal loans so if your school offers you federal loans, don’t hesitate to accept them if you need them. There are two kinds of Federal loans:
Subsidized Federal Loans: These are only available to students who demonstrate financial need.
Subsidized Stafford Loans – do not start accruing interest, and payments do not start, until a student graduates, leaves college, or becomes less than a half-time student. Interest rates will be low.
Federal Perkins Loans – are, without a doubt, the best loans available to students. They are only available to students who demonstrate the greatest financial need. The interest rate on these loans is 5%. Like Subsidized Stafford Loans, Federal Perkins Loans don’t begin accruing interest, and payments don’t start, until a student graduates, leaves college, or becomes less than a half-time student. These loans don’t need to be paid off until ten years after a student graduates. If a student becomes a teacher, and teaches in certain low income districts, part of his or her Federal Perkins Loan may be eligible for cancellation. This also applies to students who go into the Peace Corp.
2. Unsubsidized Federal Loans: Are not based on student need.
Unsubsidized Stafford Loans are available to any student who has never been convicted of a drug felony. These are not as good as subsidized Stafford Loans as the interest rates will be somewhat higher and interest begins accruing as soon as college starts.
Parent Plus Loans are for the parents of college students. Parents must have good credit and proof that they have income.
If a student still needs loans after accepting Federal Loans there are:
Private Student Loans are available through banks and other lending institutions like credit unions.
When looking into private loans, students should consider both the fees charged and the interest rate, not just the interest rate. Some banks have hidden fees that they roll into the interest rate. Other banks may charge higher interest rates and low fees. While it’s really tempting to take the loan with the lower interest rate, beware of those fees! Look for no, or low fees, and low interest rates. Shop around! Undoubtedly, your college’s financial aid office will have information for you about all of the loans that are possible and which will fit you budget the best!