Preparing college can be one of the most exciting and challenging times in a person's life. Deciding how to finance your education is really one of the student's major challenges. Of course, you should exhaust such options as savings, grants and scholarships first. But when these options are missing your needs, a student loan is a logical choice to fill in the gap.
Student loans come in a variety of flavors, with loans tailored for students with exceptional needs and loans for middle-aged students. There are also loans specially designed for medical students. There are also federal and private versions of these loans.
It is easy to understand how a student would feel overwhelmed with so many educational funding options. But like most things in life, there is a method of madness. And with a slight insight into the pros and cons of each loan form, students and their parents can more clearly see what options are best for an individual student's needs.
Of all educational options for student loans, it is with the most attractive conditions of Perkins Loans. Perkins Loans has an incredibly low fixed rate of 5 percent. These loans also have a longer "grace period" - time allowed after leaving school before payment is required. Perkin's loan offers a 9 month grace period, as opposed to 6 months with a Stafford loan. Another big advantage of Perkins Loans is that they do not start to grow until you leave school.
Your Perkins Loan can also qualify for Loan Cancellation, which can repay part or all of your student loans. Federal Loans Cancellation is offered to academics who agree to work in high-level areas, such as agreeing to teach in a designated low-income school. The disadvantage of Perkins Loans is that they are not available to everyone - these loans are designed for students with "exceptional needs".
If Perkins Loans are not an option for you, Stafford Loan is the second best. Stafford Loans offer benefits similar to Perkins Loans, with interest rates currently in the range 5 to 7 percent - still very reasonable, as loans are going on these days. Like Perkins Loans, Stafford loans do not require repayment until you leave school or leave during the half-time student. They also have a grace period of six months before payments must begin.
Stafford Loans are offered directly from the federal government, and are also offered through the use of a private lending institution. Depending on the college you will attend, you may have the opportunity to take either a direct federal Stafford Loan or take the same loan by using a private lending institution as a broker. With some schools you can have both options. In the case of private lenders, some colleges may have special institutions that they consider to be "preferred lenders" but keep in mind that you are able to apply for your own lender for a Stafford loan.
If you find that scholarships, scholarships and federal student loans do not cover your needs, private student loans are always an option. Private student loans are a good value, but generally they have slightly higher interest rates than their federal counterparts, and these rates are usually variable. Since private student loans are not federally supported, you will probably find that you need someone, like a parent, to participate in you. Even if your credit allows you to secure your own financing, it's a very wise choice to have a cosigner because it can lower your loan rate. Lowering this interest rate, even with a fraction of the percentage, can make a big difference in lowering the total amount of money that you have to pay back on the loan.
Unlike federal loans, private student loans may require you to start making monthly payments while still in school. These payments may be in any reduced form during this time, such as an interest payment. Even if your specific loan does not require any kind of refund at school, it's still a good idea to send what you can, whenever you can. Even small irregular payments made before time can have a big effect on lowering the total amount you have to pay back.
Student loans, especially the federally supported versions, are a great value for students and their parents when other funding options are not enough. It is true that the many different types of student loans can be confusing to sort through. But more loan options mean you're more likely to find a fit that is better for your specific needs. And having basic knowledge about the various funding opportunities for education makes it much easier to find the fit that suits you.