Student loans

Federal Student Loans - If you have a child who is planning for a 4-year college, and you have to existing plan(such as 529, college fund), you probably will have to apply for some type of loan to pay for that education. Student loans have become very sophisticated products and can immensely help if you have no other means of paying for college. In simple terms, you can go to two sources to get that student loan - the federal government and private lenders. In order to obtain most federal student loans, you will first need to file the Free Application for Federal Student Aid (FAFSA). In most instances, FAFSA is required for all federal financial aid including federal student loans. Federal loans are great because they are not driven by sheer profit like private lenders but you should be familiar with federal loan programs to take advantage of these offers. There are four main federal loan programs:

Federal Stafford Loan
Federal PLUS Loan
Federal Graduate PLUS Loan
Federal Consolidation Loan

The Federal Stafford loan is made in the name of the student, is based on need (only the subsidized portion), does not require any credit check. This loan id not due until after the student graduates, leaves school or stops attending on at least a half-time basis. Some schools offer Stafford loan directly through the federal government. These are commonly known as Direct Stafford Loans. The schools that offer Direct Loans are known as Direct Lending Schools. Other schools offer Stafford loans through banks or other lenders. These schools are commonly called FFEL schools (Federal Family Education Loan). In order to obtain a federal Stafford loan through a FFEL school, you will need to choose a lender.

Federal PLUS loans are made in the name of a parent. While they do require a credit check, the credit criteria to obtain a PLUS are not as stringent as they are for other types of consumer loans, for example auto or mortgage loans. Repayment of a PLUS loan begins after the loan is fully disbursed. Again, some schools offer PLUS through the federal government and others offer it through banks or other lenders.

The Federal Graduate PLUS is just like the PLUS for parents except that it is made in the name of a graduate student. However, you must first use your Federal Stafford loan eligibility before applying for a Federal Graduate PLUS loan. It is important to remember that the Federal Graduate PLUS requires payment as soon as the loan is fully disbursed. Deferment options are available while you are still attending school at least half-time. Check with your financial aid office. (Note: Services are automatically placing Grad PLUS loans in deferment).

Federal loan consolidation is for students who are in repayment status or parents who wish to extend the repayment period on their current PLUS and obtain a fixed interest rate for the life of the loan. You can combine all of your eligible federal student loans into one loan with a Federal Consolidation Loan. Consolidating also locks the interest rate you pay on your loan. One of the most important benefit of consolidating student loans is the interest rate lock that allows you to pay a fixed interest rate on all of your loans.

If federal loans are not enough to cover your educational expenses, if you do not wish to make payments of principal and interest while in school or if you want a loan that is in the student's name, there are private student loans that are made by banks and other lenders. They must be used solely for education expenses, but offer convenience and flexibility not found in other federal loan programs. However, you will need good credit and most students will need a qualified co-signer in order to obtain a private loan. Also, while interest rates, fees and other loan program terms are competitive, they vary widely from lender to lender. It is important to compare your options before choosing a private loan. One of the drawback of private loans is that interest rate of them is dictated by the credit rating of the co-signer. Also, co-signer will be help responsible for the repayment if student defaults at any time. Private loans are unsecured, credit-based loans available to students for tuition and fees, room and board, school supplies, computers and other every education related expenses.

Private Student Loans

Private student loans are like any other consumer loans where lender decides interest rates based on the creditworthiness of the borrower and co-signer. Private student loans offer following features.

These loans Don’t require completing the FAFSA, Lenders send the funds directly to you, not your school
Can help when federal student loans aren’t enough to fund your entire education
Have interest rates and fees that are determined by the lender and often depend on your credit rating.
May or may not have deferment and forbearance options depending on the lender.
After you've checked for free funding available to you, if you decide you'll need additional assistance paying for your education, it's time to look to federal student loans. These are long-term loans with low interest rates designed exclusively for those needing money to meet the costs associated with education.

You should always plan to look for federal loan options before investigating private loan sources, because these loans are sometimes more difficult to obtain and can often end up being very costly to you in the end. Private loans are designed to supplement federal loan programs and are available from schools, banks and education loan organizations.

Final Verdict

Remember, Any education loan has to be repaid — even if you don't finish school, are unhappy with the education you received or are unable to find a job, or you're making less money than you planned. So borrow wisely now, because the amount of money you borrow now will have long-term effects that can influence your lifestyle!

Planning for the long term

Once you're ready to graduate, don't forget about the student loans that you've racked up. Also, you probably still have a few months left before your grace period ends and you have to start worrying about repaying your loans. But if college has taught you anything, it's that time flies. Why not take a minute right now to think about student loan consolidation? It might help lower your monthly payments and simplify your life in the future. Remember, not everyone qualifies for student loan consolidation and only the borrowers who are currently in their grace or repayment period and who owe money on eligible federal student loans are eligible.
Students enrolled in school at least part-time, if they have a Direct Loan Program loan or attend a Direct Loan school are also eligible. And here is the final thought - Even though loan consolidation can truly simplify and help many students manage their monthly payments, there are some cases when consolidation may not be right for you. So choose wisely.