Managing Student Loans

It is a practical necessity for most students to need loans to finance a college education. This can be a daunting thought for both students and their families if unaccustomed to carrying debt. Just like a mortgage though a student loan is an investment in the future, as the prospects are much brighter for graduates. It may well be a loan you cannot afford not to take.

Federal student loans offer a recognized form of borrowing, and have many advantages over private loans, not least their cost. They also have the security of fixed interest rates which give peace of mind in uncertain economic times. Together with scholarships and grants, federal student loans are the best option for students’ long term, to finance their education.

There is an easy application process available online to start the process off. An online form is completed to the FASA, who will then assess the student’s eligibility for one of two loans which are both known as federal Stafford loans. The term of a loan is for one year’s duration, and will need to be reapplied for in subsequent years.

The first federal Stafford loan is the subsidized one which is means tested. If you qualify for this loan it means that the government is subsidizing the interest on the loan during the whole of your college years, and repayment of the interest does not commence until after graduation. The second Stafford loan is unsubsidized which means that interest is applied to the loan as soon as it is dispersed, and will thus accrue. Both Stafford loans do not require a credit cheque and offer fixed interest rates.

An additional federal loan which students may apply for is the federal Perkins loan. The funding on this loan is made up of both federal funds and funds from the individual school. It is not subject to a credit check and is usually granted to students of lower income families.

A further federal loan is available to parents to assist their child, and this is the federal Plus loan. The parents will be subject to a credit check and it will be their loan. At no point can the loan be transferred to the student’s name, even if the student wishes to assume the loan when working. With a PLUS loan the interest is added from dispersion of the loan and interest payments can be made from the beginning of the loan or after graduation.

All student loans are non dischargeable which means they must be repaid no matter what the circumstances. Some students who have the federal Perkins loan may find some of their loan forgiven, depending on the career path they take.

It is wise to make an FASA application early to get an idea of the amount of federal loan you will receive. Take the time to read about student loans and make sure that you understand the process before you apply. If you are unsure of anything the financial aid officers at your chosen school will be able to give you the applicable information, and guide you with any uncertainties.