Managing Student Loans

The ideal way to fund college is through scholarships and grants, thus reducing the necessity of taking on student loans. The reality is though that the majority of students end up with some kind of student loan debt unless they can access the best financial aid awards. With student loan debt now averaging $24,000 at graduation it is imperative to find the best deals around on loans, and avoid private student loans unless an absolute necessity.

Federal student loans remain the best option for students and carry the lowest interest rates. Application is made through the FAFSA which also determines if the student will be awarded the needs based Pell grant. The federal Perkins loan is a low interest subsidized government loan granted on the basis of financial need. In addition there are two federal Stafford loans, one subsidized and one unsubsidized. Even if students do not meet the financial need criteria for the subsidized Stafford loan they will generally receive the Stafford unsubsidized loan.

Both federal Stafford loans carry low interest rates and are provided directly from the State Department of Education. It is possible to have federal student loans consolidated together after graduation, and to apply for deferments when necessary. Those who go on to work in some areas of the public sector may be eligible to have some part of their student loans forgiven.

Federal student loans are issued without credit checks, which means that anyone who has not previously defaulted on a student loan is eligible to apply, regardless of credit history. In addition to these federal loans which the student applies for, parents can also apply for the federal Parent Plus loan, which carries a low rate of interest. The application does involve a credit check, and the loan itself is issued to the parents rather than the student and is non transferrable. Parent Plus offers a preferential interest rate when compared to private student loans which the parent in most instances needs to co-sign anyway, if the student has no established credit history of their own.

In addition to low interest federal student loans it is possible to source interest free student loans which are usually offered by charitable foundations. Sometimes they are offered to students only within a certain state who attend an instate school, whilst others can be found nationwide. As an example the Bill Raskob foundation offers interest free loans to students on the basis of both need and character, and as students make their repayments the funds are revolved into interest free loans for further eligible students.

The wisest option is to be financially prepared with applications made for scholarships and grants early, and the FAFSA submitted as soon as possible. It is also worth investigating some of the colleges which offer the best financial aid for students, often negating the need for student loans altogether.